ECONOMIC GROWTH Flashcards
WHAT IS ECONOMIC GROWTH?
INCREASE IN THE GDP OVER TIME.
WHAT IS ACTUAL ECONOMIC GROWTH?
MEASURED BY THE ANNUAL % IN A COUNTRY’S REAL NATIONAL OUTPUT.
AFFECTED BY AD.
WHAT IS POTENTIAL ECONOMIC GROWTH?
MEASURED BY THE ESTIMATED ANNUAL CHANGE IN A COUNTRY’S POTENTIAL LEVEL OF NATIONAL OUTPUT.
AFFECTED BY LRAS.
WHAT IS TOTAL/NOMINAL GDP?
TOTAL MARKET VALUE OF ALL GOODS AND SERVICES PRODUCED IN THE COUNTRY IN A GIVEN YEAR.
WHAT IS GDP PER CAPITA?
AVERAGE LEVEL OF GDP PER PERSON.
WHAT IS REAL GDP?
GDP ADJUSTED FOR INFLATION.
WHAT DOES GNI STAND FOR?
GROSS NATIONAL INCOME.
WHAT IS GNI?
FINAL VALUE OF INCOME CREATED BY A COUNTRY’S FACTORS OF PRODUCTION.
HOW CAN GNI BE MEASURED?
GDP+NET INCOME RECEIVED FROM ABROAD E.G INTEREST/PROFITS/ REMITTANCESES
WHAT DOES VALUE MEAN?
REPRESENTS THE AMOUNT OF MONEY SPENT
WHAT DOES VOLUME MEAN?
REPRESENTS THE TOTAL QUANTITY PRODUCED.
WHAT IS THE GOVERNMENT TARGET FOR ECONOMIC GROWTH?
SUSTAINABLE ECONOMIC GROWTH WHICH IS ESTIMATED TO BE AROUND 2-3% PER YR.
WHY IS 10% ECONOMIC GROWTH NOT DESIRABLE?
COULD LEAD TO ENVIRONMENTAL PROBLEMS, FUTURE BOTTLENECKS IN SUPPLY, FUTURE RECESSIONS DUE TO OVERCONFIDENCE AND POTENTIAL INFLATION.
WHAT IS AN OUTPUT GAP?
DIFFERENCE BETWEEN THE ACTUAL LEVEL OF GDP AND THE PRODUCTIVE POTENTIAL OF THE ECONOMY.
WHAT IS A POSITIVE OUTPUT GAP?
EXISTS WHEN ACTUAL GDP IS ABOVE THE PRODUCTIVE POTENTIAL OF THE ECONOMY (GENERALLY WHEN IN A BOOM)
WHAT IS A NEGATIVE OUTPUT GAP?
EXISTS WHEN ACTUAL GDP IS BELOW THE PRODUCTIVE POTENTIAL OF THE ECONOMY (GENERALLY IN A RECESSION)
WHAT R THE IMPLICATIONS OF A POSITIVE OUTPUT GAP?
- HIGH INFLATION
- BALANCE OF PAYMENTS DEFICIT
WHAT R THE IMPLICATIONS OF A NEGATIVE OUTPUT GAP?
- LOW GDP
- HIGH UNEMPLOYMENT
WHAT IS PRODUCTIVITY?
MEASURE OF THE EFFICIENT USE OF THE FACTORS OF PRODUCTION.
WHAT CAUSES THE PRODUCTIVITY GAP?
DIFFERENCES IN THE QUALITY AND QUANTITY OF FACTORS OF PRODUCTION.
WHAT R THE BENEFITS OF ECONOMIC GROWTH?
- INCREASED TAX REV
- INCREASED CONFIDENCE
- REDUCED UNEMPLOYMENT
- GREATER STANDARD OF LIVING
- INCREASED FDI
WHAT R THE COSTS OF ECONOMIC GROWTH?
- INCREASED EXTERNALITIES
- INCREASED INFLATION
- INCREASED BALANCE OF PAYMENTS DEFICIT
- INCREADED INEQUALITY
- GREATER VOLATILITY IN ECONOMIC CYCLE E.G DEEPER RECESSIONS
WHAT DOES PPP STAND FOR?
PURCHASING POWER PARITY
WHAT IS PPP?
MEASURES THE PURCHASING POWER OF DIFFERENT CURRENCIES IN THEIR DOMESTIC COUNTRIES FOR A GIVEN BASKET OF GOODS.
WHAT IS THE BENEFIT OF USING PPP?
TAKES INTO ACCOUNT THE RELATIVE COST OF LIVING RATHER THAN JUST GDP.
WHAT R THE PROBLEMS OF USING GDP AS A STANDARD OF LIVING INDICATOR?
- NO QUALITY OF LIFE INCLUDED E.G POLLUTION
- HIDDEN ECONOMY
- INFORMAL ECONOMY NOT INCLUDED
- NO ACCOUNT FOR INCOME DISTRIBUTION
- DOESN’T TAKE INTO ACCOUNT COST OF LIVING
WHAT IS A HIDDEN ECONOMY?
CASH IN HAND WORK.
ESTIMATED TO ACCOUNT FOR 7% OF THE UK ECONOMY.
WHAT IS AN INFORMAL ECONOMY?
EXAMPLES R VOLUNTEERING, GROWING YOUR OWN FOOD AND HOUSEWORK.
HOW CAN HAPPINESS BE MEASURED?
- HAPPINESS INDEX
- WORLD HAPPINESS REPORT
WHAT R THE ADVANTAGES OF MEASURING HAPPINESS?
- FUNDAMENTAL GOAL FOR MANY PEOPLE
- CONSIDERS MORE THAN JUST INCOME
WHAT R THE DISADVANTAGES OF MEASURING HAPPINESS?
- DIFFICULT TO VALUE/ JUDGE HAPPINESS
- SUBJECTIVE MEASURE SO HARD TO COMPARE SCORES
- THINGS MAY MAKE PEOPLE HAPPY BUT BE UNETHICAL E.G SADISTS.
WHAT IS THE EASTERLIN PARADOX?
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.
WHY ARE PPPs USED?
IMPROVE ACCURACY WHEN COMPARING DATA BETWEEN COUNTRIES.
COMPARES COST OF LIVING AND BUYING POWER.
