Economic growth

Question 1

What are the causes of growth?

Answer 1

Short run (increase in AD):
- consumption and investment

Long run(increase in AS):
- increase in quantity and quality of resources
- increased efficiency and technology

Question 2

What is wellbeing?

Answer 2

• Health
• Education
• Personal activities
• Social connections
• Income inequality
• Possible inflation

Question 3

What is standard of living?

Answer 3

Improvement in standard of living = households can afford more goods and services = afford better housing
Worsening in standard of living = rise in inequality and pollution

Question 4

What is purchasing power adjustments and parity adjustments?

Answer 4

Rate at which the currency of one country would have to be converted into that of another country

Question 5

What is real GDP?

Answer 5

Nominal GDP adjusted for inflation

Question 6

What is Nominal GDP?

Answer 6

Monetary value of output of all goods and services of a country

Question 7

What is GDP?

Answer 7

Value of all output produced within a country over a period of time

Question 8

What is GNI?

Answer 8

GDP + income residents received abroad

Question 9

How to calculate real GDP?

Answer 9

nominal value / price index x 100

Question 10

How to calculate index number?

Answer 10

value for x / value for base year x 100

Question 11

What are the problems with using GDP as a measure of economic growth?

Answer 11

• Shadow economy
• Output is unrecorded
• Production does not equal consumption
• Ignores external costs