Economic growth Flashcards
What is economic growth?
Increase of goods and services produced over a period of time
This can be measured in the short run using actual annual % change in real national output, typically measured by GDP.
How is short-run economic growth measured?
Actual annual % change in real national output
This is commonly assessed using GDP.
What does long-run economic growth refer to?
An increase in the potential production capacity of the economy
This is measured using the PPF curve.
Define purchasing power parity (PPP).
Comparison of how much your money buys you in differing countries
PPP helps in assessing the relative value of currencies.
What is GDP?
Value of all goods and services produced in the economy over a period of time.
How is real national output calculated?
Real national output = nominal national output / average price level.
What is total income?
The value of all goods and services produced in a country.
What is per capita income?
Total income divided by the population of the country.
What does real national output allow us to do?
Give a meaningful comparison when comparing the size of the economy of different countries.
What does real per capita income allow us to compare?
The standard of living of individuals within each country.
Differentiate between volume and value in an economy.
Volume looks at the amount of goods and services produced; value looks at the monetary worth of those goods and services.
What is capital widening?
Extra capital being used with an increased amount of labour, leading to total production increases but likely unchanged output per worker.
What is capital deepening?
Increase in the amount of capital for each worker, leading to total production increases and improved output per worker.
What does GNP stand for?
Gross National Product.
What is GNP?
The value of all goods and services produced by domestic businesses both at home and abroad.
What does GNI stand for?
Gross National Income.
What is GNI?
Total level of income of a country.
What are the limitations of using GNP and GNI per capita as comparators?
Many jobs in low-income countries are informal and not officially recorded.
What is the purpose of purchasing power parities?
To look at the relative value of different currencies.
What does purchasing power parity do with real GDP?
Divides it by the number of people within the country and converts income into dollars for comparison.
List some limitations of using GDP to compare living standards.
- Accuracy of statistics
- The shadow economy not included
- Transactions without monetary value
- Negative externalities not considered
- Economic growth can cause income inequality.
What issues arise when comparing developed and developing countries?
- Accuracy of statistics varies
- Developing countries consume what they produce
- Developed countries may increase income at the expense of quality of life
- Alternative methods of measuring quality of life are available.
What are the six factors identified by the UN that impact happiness?
- Real GDP per capita
- Healthy life expectancy
- Having someone to count on
- Perceived freedom to make life choices
- Freedom from corruption
- Generosity.
What are the big 7 factors affecting happiness according to Richard Layard?
- Family relationships
- Financial situation
- Work
- Community and friends
- Health
- Personal freedom
- Personal values.
