Economic Growth Flashcards
What is economic growth?
increase in the potential output of an economy or in the real value of goods & services produced, measured by the % change in real GDP.
What is gross domestic product?
measures the value of real output of the economy over a period of time; a rise in GDP indicates economic growth.
What is nominal GDP?
the monetary value of all goods and services produced in the economy (GDP at current prices).
What is real GDP?
the nominal value of GDP adjusted for inflation (GDP at constant prices).
What is real GDP per capita?
national income per person often used as a proxy measure for the standard of living.
What is value v volume?
the value of goods and services shows what they are worth; the volume shows the number that are produced
What is gross national product?
GDP + net property income from abroad
What is gross national income?
similar to GNP =final value of income flowing to a country’s owned factors of production in a given year
GNI = Gross Domestic Product + net income from abroad of compensation of employees and property income.
List how GNI could be higher than GDP.
GNI could be higher than GDP ifthere is:
* income from worker remittances,
* income from interest on bonds and savings held overseas
* income from dividends on profits from overseas investment
* overseas aid transfers (inflows) for poorer countries.
What is purchasing power parity?
Purchasing power parity (PPP) is used when assessing relative living standards between countries. Real GDP needs to be converted into the same currency for comparison, but the market exchange rate does not reflect differences in the cost of living/purchasing power of income in the countries.
PPP is calculated by comparing the price of a basket of comparable goods andservices in different countries. PPP measures the total amount of goods and services that a single unit of a country’s currency can buy in another country.
How do we use a PPF to show economic growth?
