chapter 5 Flashcards
National Income definition
Income generated from the production of all final goods and services by a country within a specific period, normally a year
Gross Domestic Product (GDP) definition
Total money value of all final goods and services produced within the geographical boundary of a country (regardless of the ownership of the factors of production) within a specific period
Net Factor Income from Abroad (NYFA) definition
Factor incomes earned by residents from overseas sources minus factor incomes earned by non-residents from the domestic economy
Nominal vs Real
Nominal
- measured at current prices
- does not account for inflation
Real
- measured at constant prices
- accounts for inflation
What are the uses of National Income statistics
- To measure Economic Growth
- To measure Material SOL
- For government to formulate sector-based economic policies
- For private firms to plan production & investment
Types of Standard of Living (SOL)
- material SOL
- non-material SOL
Standard of Living (SOL) definition
Level of economic welfare & social wellbeing of an individual/household.
Income Inequality
the extent of the uneven distribution of income among a population
Limitations of comparison over time
does not account for :
- changes in price over time (nominal)
- changes in population size
- changes in income distribution
- excluded productive activities
- externalities incurred over time
- leisure time
- changes in composition of national income
- accuracy & reliability of data
Limitations of comparison over space
difference in :
- currencies
- population size/density
- income distribution
- amount of externalities generated
- ‘black economy’
- leisure time
- accuracy & reliability of data
Material SOL analysis
Individual/household’s wants & needs are more/less satisfied
Non-material analysis
More/less stress experienced
