economic growth Flashcards
economic growth definition
an increase in annual real gdp
real gdp
the value of all goods and services produced i a country in a year adjusted for inflation
nominal gdp
the value of all goods and services produced in a country in a year not adjusted for inflation
benefits of economic growth
higher living standards, less unemployment, accelerator effect, fiscal dividend (tax revenue increases)
costs of economic growth
risk of high inflation and interest rates, environmental effects, income and wealth inequality
how to calculate the deflator for gdp
deflator = 1.(decimal of inflation)
how to calculate real gdp
nominal/deflator
3 sectors of economic activity
primary, secondary and tertiary
characteristics of LIDCs
economy is primarily made of primary sector
link between environmental damage and economic growth
it is hard to progress into the sec today sector of an economy without mass producing using factories which must be powered by carbon dioxide emitters. some economists argue that developing countries should prioritise the environment over economic growth but others say we did the same thing.
gdp per capita
the value of all goods and services produced in a country in a year divided by the population
pros of using gdp to measure economies
pros: can compare countries by converting to common currency, can be adjusted for inflation, can be adjusted for purchasing power parity
cons of using gdp to measure economies
does not include shadow economies, GDP data is inaccurate, can be politically manipulated
why may gdp give a distorted image of living standards. what does gdp not show
regional variations in income and spending, wealth and income inequality, working hours/conditions, high levels of investment may be sacrificing consumer goods, changes in life expectancy, environmental damage the value of non marketed output (charities), innovation, and defensive expenditures.
what is hdi
human development index
How does HDI measure economies
Education- mean years of schooling and expected years of schooling
Life expectancy
GNI per cpaita adjusted to purchasing power parity standard
countries rated between 0-1. low is 0-0.5, medium is 0.5-0.8 and high 0.8-1
why is gni used and what is it
gni is used due to the growing number of remittances in the global economy. it is real gdp+incomes from abroad.
what is purchasing power parity
a method of currency valuation based on the idea that 2 identical goods in different countries should cost the same but they do not
what does PPP allow us to consider
the fact that the same good can be cheaper or more expensive in different countries, it is harder to live in different countries even when currencies are converted to USD
what is the measuring national well-being programme
twice a year the ONS report assess health, natural environment, personal finances and crime using objective and subjective data
what is the happiness index
first created by the global happiness council. index of happiness based on measurable factors. used in the world happiness report.
what is fiscal dividend
increase in government revenue due to economic growth. as incomes rise as does income tax, as revenues rise as does corporation tax. this allows for more public spending and reduction in taxes as ore people are paying and have larger incomes
what is fiscal drag
inflation and increase in incomes push more taxpayers into higher tax brackets, so governments have higher revenue. reduces/ limits he increase of aggregate demand as incomes decrease so is a mildly deflationary fiscal policy. fiscal stabiliser as high incomes result in high tax.
