Eco growth Flashcards
What does Economic growth refer to
An increase in an economy’s productive capacity over time
What is eco growth measured by
Gross domestic product (GDP)
What is gdp
a valuation of an economy’s level of output of goods and services annually
Benefits of GDP growth
- Increased real incomes for households
- Increasing employment in the primary, secondary and tertiary sector
- increased profits for businesses
- increase opportunity for global trade
- ## higher tax collection = higher gov revenue
Target rate for GDP
3-4% PA
Why do we have a target rate for GDP
Our target rate is
- Substainable environmental and social wise
- Does not put pressure on other macroeconomic goals
Current GDP
2.4%
What is real GDP
GDP adjusted for inflation
Measurement of GDP
- Expenditure method
- Income method
- Value of production
- Averaging method
GDP - expenditure method
- A calculation of the amount spent on purchasing goods and services by various sectors
C+I+G+(x-m)
GDP - Income Method
The total of all incomes paid to all owners of productive resources
Rent, wages, dividends, interest, profits.
Includes all earnings of individuals, firms and governments
GDP - Values of production method
The amount of value added to a good at each stage of production process. Value of output - value of input
GDP - Averaging method
Average of the other three methods
Limitations of the measurement of GDP
-♣ Time lags
♣ Some G + S are not markets therefore excluded from GDP estimates
♣ Problem of tax evasion and tax avoidant
♣ Limitations measuring the standard of living and welfare
♣ Inconsistencies (backyard produce for consumption)
♣ Some not delivered at market value (libraries and parks)
What is the largest and must sustainable component of the GDP
Consumption (60%)
