Economic Growth Flashcards
Define economic growth
An increase in the economy’s output of goods and services
What is actual growth
An economy produces more goods and services
What is potential growth
An increase in the production capacity of the economy
Define national income
Value of the total output produced in a country within a time period, usually a year
Define national wealth
The value of the stock of money and goods that a nation’s citizens own - at a point in time
What is the circular flow of income?
The movement of spending and income throughout the economy, between households and firms
What are the 3 methods of measuring national income?
Income method
Output method
Expenditure method
What is the income method for measuring national income?
Calculate everyone’s income in an economy and add it up (aggregate)
GDP = rent + wages + income + growths
What is the output method for measuring national income?
Add up (aggregate) the value of the output of every firm (goods and services) produced in a time period, usually one year
What is the expenditure method of measuring national income?
Make a record of all expenditure on new goods and services and add it up (aggregate)
GDP = C + I + G + X -M
What is the problem with income method for measuring national income?
Some income is illegal and unrecorded
How to calculate net exports
X - M
Define GDP
Total value of a nation’s domestically produced output, within a specific time period, usually one period
Define GNP
Income of UK citizens wherever located, usually within one year
How to get to GNP from GDP
GDP + net property income from abroad = GNP
