Economic Growth

Question 1

Economic Growth is measured using

Answer 1

Gross Domestic Product (GDP). It measures how NZ’s production/income is increasing.

Question 2

Real Income refers to

Answer 2

Actual Economic Output - the no. of goods and services produced by an economy.

Question 3

Using Circular flow in regards to real income, we can see that:

Answer 3

The output of an economy must equal the income of the households. This measurement equates to GDP (Gross Domestic Product)

Question 4

Productive Capacity

Answer 4

The measurement of an economy’s economic potential to produce goods and services.

Question 5

The Output Gap measures

Answer 5

The difference between an economy’s actual and potential GDP

Question 6

Net Social Welfare

Answer 6

Measures the quality of life looking at indicators like life expectancy, no. of doctors per person, no. of TVs or cars per person, environment, health and education. (E.g. HDI)

Question 7

The PPF model shows

Answer 7

The maximum output combinations possible with given resources and technology. Meaning that for a fixed amount of resources and technology, there is a physical limit on output.

Question 8

Gross Domestic Product (GDP)..

Answer 8

Is the value of all goods and services produced in NZ over a specified time (a year) and is often referred to as total output.

Question 9

Real GDP

Answer 9

Real GDP is GDP adjusted for changing prices (i.e. inflation) and so only looks at the change in output and not the influence of price changes on GDP.

Question 10

RGDP/Capita

Answer 10

Takes into account changes in the population and is often a better measure of the standard of living, because it looks at the impact of population changes on growth.

Question 11

Real Income is

Answer 11

the same as Real GDP. If more commodities (goods) are being produced, then more income is being made. This income includes: Workers wages, profits, return on interest etc.

Question 12

Investment is

Answer 12

the buying of capital goods

Question 13

When workers make efforts to increase or maintain the standards of living..

Answer 13

Nominal Wages are likely to rise. This rise in nominal wages cause cost push inflation.

Question 14

Business Cycle

Answer 14

Periods of high growth (booms) and low growth (downturns) and negative growth (recessions) that occur during the natural progression of the economy.

Question 15

Consumer Goods are the

Answer 15

Final goods and services used by consumers to satisfy their needs and wants.

Question 16

Capital Goods are

Answer 16

Manufactured goods that are used in the production process (make or provide other goods and services).

Question 17

Examples of Human Capital are:

Answer 17

Knowledge, Skills and abilities of workers / people which come from education and training.

Question 18

Savings are

Answer 18

The part of disposable income not used for consumption.