ECONOMIC GROWTH

Question 1

WHAT IS ECONOMIC GROWTH?

Answer 1

INCREASE IN THE GDP OVER TIME.

Question 2

WHAT IS ACTUAL ECONOMIC GROWTH?

Answer 2

MEASURED BY THE ANNUAL % IN A COUNTRY’S REAL NATIONAL OUTPUT.
AFFECTED BY AD.

Question 3

WHAT IS POTENTIAL ECONOMIC GROWTH?

Answer 3

MEASURED BY THE ESTIMATED ANNUAL CHANGE IN A COUNTRY’S POTENTIAL LEVEL OF NATIONAL OUTPUT.
AFFECTED BY LRAS.

Question 4

WHAT IS TOTAL/NOMINAL GDP?

Answer 4

TOTAL MARKET VALUE OF ALL GOODS AND SERVICES PRODUCED IN THE COUNTRY IN A GIVEN YEAR.

Question 5

WHAT IS GDP PER CAPITA?

Answer 5

AVERAGE LEVEL OF GDP PER PERSON.

Question 6

WHAT IS REAL GDP?

Answer 6

GDP ADJUSTED FOR INFLATION.

Question 7

WHAT DOES GNI STAND FOR?

Answer 7

GROSS NATIONAL INCOME.

Question 8

WHAT IS GNI?

Answer 8

FINAL VALUE OF INCOME CREATED BY A COUNTRY’S FACTORS OF PRODUCTION.

Question 9

HOW CAN GNI BE MEASURED?

Answer 9

GDP+NET INCOME RECEIVED FROM ABROAD E.G INTEREST/PROFITS/ REMITTANCESES

Question 10

WHAT DOES VALUE MEAN?

Answer 10

REPRESENTS THE AMOUNT OF MONEY SPENT

Question 11

WHAT DOES VOLUME MEAN?

Answer 11

REPRESENTS THE TOTAL QUANTITY PRODUCED.

Question 12

WHAT IS THE GOVERNMENT TARGET FOR ECONOMIC GROWTH?

Answer 12

SUSTAINABLE ECONOMIC GROWTH WHICH IS ESTIMATED TO BE AROUND 2-3% PER YR.

Question 13

WHY IS 10% ECONOMIC GROWTH NOT DESIRABLE?

Answer 13

COULD LEAD TO ENVIRONMENTAL PROBLEMS, FUTURE BOTTLENECKS IN SUPPLY, FUTURE RECESSIONS DUE TO OVERCONFIDENCE AND POTENTIAL INFLATION.

Question 14

WHAT IS AN OUTPUT GAP?

Answer 14

DIFFERENCE BETWEEN THE ACTUAL LEVEL OF GDP AND THE PRODUCTIVE POTENTIAL OF THE ECONOMY.

Question 15

WHAT IS A POSITIVE OUTPUT GAP?

Answer 15

EXISTS WHEN ACTUAL GDP IS ABOVE THE PRODUCTIVE POTENTIAL OF THE ECONOMY (GENERALLY WHEN IN A BOOM)

Question 16

WHAT IS A NEGATIVE OUTPUT GAP?

Answer 16

EXISTS WHEN ACTUAL GDP IS BELOW THE PRODUCTIVE POTENTIAL OF THE ECONOMY (GENERALLY IN A RECESSION)

Question 17

WHAT R THE IMPLICATIONS OF A POSITIVE OUTPUT GAP?

Answer 17

1. HIGH INFLATION
2. BALANCE OF PAYMENTS DEFICIT

Question 18

WHAT R THE IMPLICATIONS OF A NEGATIVE OUTPUT GAP?

Answer 18

1. LOW GDP
2. HIGH UNEMPLOYMENT

Question 19

WHAT IS PRODUCTIVITY?

Answer 19

MEASURE OF THE EFFICIENT USE OF THE FACTORS OF PRODUCTION.

Question 20

WHAT CAUSES THE PRODUCTIVITY GAP?

Answer 20

DIFFERENCES IN THE QUALITY AND QUANTITY OF FACTORS OF PRODUCTION.

Question 21

WHAT R THE BENEFITS OF ECONOMIC GROWTH?

Answer 21

1. INCREASED TAX REV
2. INCREASED CONFIDENCE
3. REDUCED UNEMPLOYMENT
4. GREATER STANDARD OF LIVING
5. INCREASED FDI

Question 22

WHAT R THE COSTS OF ECONOMIC GROWTH?

Answer 22

1. INCREASED EXTERNALITIES
2. INCREASED INFLATION
3. INCREASED BALANCE OF PAYMENTS DEFICIT
4. INCREADED INEQUALITY
5. GREATER VOLATILITY IN ECONOMIC CYCLE E.G DEEPER RECESSIONS

Question 23

WHAT DOES PPP STAND FOR?

Answer 23

PURCHASING POWER PARITY

Question 24

WHAT IS PPP?

Answer 24

MEASURES THE PURCHASING POWER OF DIFFERENT CURRENCIES IN THEIR DOMESTIC COUNTRIES FOR A GIVEN BASKET OF GOODS.

Question 25

WHAT IS THE BENEFIT OF USING PPP?

Answer 25

TAKES INTO ACCOUNT THE RELATIVE COST OF LIVING RATHER THAN JUST GDP.

Question 26

WHAT R THE PROBLEMS OF USING GDP AS A STANDARD OF LIVING INDICATOR?

Answer 26

1. NO QUALITY OF LIFE INCLUDED E.G POLLUTION 2. HIDDEN ECONOMY 3. INFORMAL ECONOMY NOT INCLUDED 4. NO ACCOUNT FOR INCOME DISTRIBUTION 5. DOESN'T TAKE INTO ACCOUNT COST OF LIVING

Question 27

WHAT IS A HIDDEN ECONOMY?

Answer 27

CASH IN HAND WORK. ESTIMATED TO ACCOUNT FOR 7% OF THE UK ECONOMY.

Question 28

WHAT IS AN INFORMAL ECONOMY?

Answer 28

EXAMPLES R VOLUNTEERING, GROWING YOUR OWN FOOD AND HOUSEWORK.

Question 29

HOW CAN HAPPINESS BE MEASURED?

Answer 29

1. HAPPINESS INDEX 2. WORLD HAPPINESS REPORT

Question 30

WHAT R THE ADVANTAGES OF MEASURING HAPPINESS?

Answer 30

1. FUNDAMENTAL GOAL FOR MANY PEOPLE 2. CONSIDERS MORE THAN JUST INCOME

Question 31

WHAT R THE DISADVANTAGES OF MEASURING HAPPINESS?

Answer 31

1. DIFFICULT TO VALUE/ JUDGE HAPPINESS 2. SUBJECTIVE MEASURE SO HARD TO COMPARE SCORES 3. THINGS MAY MAKE PEOPLE HAPPY BUT BE UNETHICAL E.G SADISTS.

Question 32

WHAT IS THE EASTERLIN PARADOX?

Answer 32

AT LOW LEVELS OF GDP, INCREASES IN INCOME INCREASE HAPPINESS AS PEOPLE CAN MEET THEIR BASIC NEEDS. HOWEVER, BEYOND THIS, HAPPINESS STAGNATES OR EVEN DECLINES AS BEING ABLE TO AFFORD MORE GOODS AND SERVICES DOESN'T INCREASE HAPPINESS.

Question 33

WHY ARE PPPs USED?

Answer 33

IMPROVE ACCURACY WHEN COMPARING DATA BETWEEN COUNTRIES. COMPARES COST OF LIVING AND BUYING POWER.

Question 34

WHAT IS A RECESSION?

Answer 34

2 OR MROE CONSECUTIVE QUARTERS OF NEGATIVE ECONOMIC GROWTH.

Question 35

WHAT R CHARACTERISTICS OF A RECESSION?

Answer 35

1. FALLING INFLATION 2. RISING UNEMPLOYMENT 3. INCREASED BUDGET DEFICIT