Economic Growth

Question 1

What is Economic Growth?

Answer 1

It is the increase in the value of goods and services produced by the economy within a time period

Question 2

What does GDP stand for?

Answer 2

Gross Domestic Product

Question 3

What is GDP?

Answer 3

The value of goods + services being produced by the economy within a time period

Question 4

How is Economic Growth measured?

Answer 4

If the GDP grows, the economy is growing

Question 5

What is the definition of a recession?

Answer 5

When the GDP of an economy shrinks for 6+ months

Question 6

What does the total GDP calculate?

Answer 6

The total value of good + services being produced by the economy

Question 7

What is real GDP?

Answer 7

The total value of goods + services being produced in the economy + TAKING ACCOUNT OF INFLATION

Question 8

What is nominal GDP?

Answer 8

The total value of goods + services being produced in the economy but NOT taking account of inflation

Question 9

How do you calculate the GDP per capita

Answer 9

total GDP / population

Question 10

What does GDP per capita represent

Answer 10

Average income

Question 11

What does GNI stand for

Answer 11

Gross national income

Question 12

what is GNI

Answer 12

the measure of the FINAL value of incomes FLOWING into UK OWNED businesses whether they are located in the UK or overseas (aka GDP + the income of UK businesses that are situated overseas)

Question 13

what does GNP stand for

Answer 13

Gross national product

Question 14

What is GNP?

Answer 14

GNI + remittances

Question 15

what are remittances

Answer 15

transfers of money across national boundaries by migrant workers

Question 16

what are remittances important for

Answer 16

many developing countries

Question 17

why have remittances increased

Answer 17

flows have grown in the world economy over the long term as the scale of immigration between countries have GROWN

Question 18

what is the easterlin paradox (4 steps in chain)

Answer 18

1. rich people are happier than poor people
2. but rich societies tend to be less happy than poor societies
3. thus as countries get richer they do not necessarily become happier
4. thus GDP + GNI + GNP cannot sure happiness as
   MONEY DOES NOT EQUAL HAPPINESS

Question 19

What is the output gap

Answer 19

differences between potential output and actual output

Question 20

how do you calculate the output gap

Answer 20

potential output - actual output

Question 21

what is the potential output

Answer 21

maximum output an economy can produce if they are fully using all factors of production

Question 22

what is the actual output

Answer 22

what you actually produce

Question 23

what does the PPF show

Answer 23

the maximum potential output for two goods or services that an economy can achieve when all its resources are fully and efficiently employed, give the level of technology available

Question 24

what does PPF stand for?

Answer 24

production possibility frontier

Question 25

what does it mean when there is a negative production output gap

Answer 25

actual output is below potential output

Question 26

when does negative production output gap occur (2)

Answer 26

1. when there is spare capacity in the economy (e.g. unemployed labour)
2. total aggregate demand is too low = inflation is falling

Question 27

when does a positive production output gap occur (2)

Answer 27

1. when the economy is booming (actual output is exceeding potential output)
2. when aggregate demand is growing faster than aggregate supply = push prices up = inflation

Question 28

what is the costs of economic growth? (3)

Answer 28

1. increase in crime
   2, more pollution
2. more tax

Question 29

what are the benefits of economic growth? (4)

Answer 29

1. foreign aid
2. lower unemployment
3. better infrastructure
4. more tax = can improve = better quality of life (better healthcare / education

Question 30

what are the limitations of GDP statistics (6)

Answer 30

1. non-marketed output (housework)
2. undeclared economic activity (pocket money)
3. transfer payments are excluded (people get benefits but they don’t work)
4. GDP per capital NOT = how income is distributed
5. pollution is not included
6. not tell us about quality of life