Economic Growth and Circular Flow Flashcards
what is national income
measures the total value goods and services produced in an economy over a period of time usually a year
what is economic growth and how is it measured
an increase in the productive potential of an economy
measured using GDP/real GDP
what are some limitations of using GDP to compare living standards?
-inaccurate information
-unrecorded or under-recorded economic activity
-illegal market activity not recorded
-external costs
-doesn’t take into account life expectancy, infant mortality rates, literacy rates
what countries had the largest GDP per capita in 2022? and why?
Luxemburg - banking
Norway - oil
Ireland - multinational corporations
what was the average GDP per capita in 2021 in:
-the uk
-london
-wales
uk- £32,000
London - £56,000
Wales - £24,000
what are the 5 main economic objectives
- sustainable GDP growth
- stable price levels - inflation 2%
- low unemployment 3-4%
- sustainable trade balance
- sustainable FISCAL balance, gov finances
what is actual economic growth
an increase in real GDP of an economy
what is potential economic growth
an increase in the productive capacity of an economy. A shift right of LRAS or PPF
what is export led growth
where economic growth is caused by increased exports
what is gross national product (GNI/GNP)
the total income earned by a country’s factors of production wherever they are located
what is the formula for gross national product (GNI/GNP)
GDP + net property income from abroad
what is real GDP
the total value of goods and services produced in the economy in a year taking the rate of inflation into account
what is the formula for real GDP
GDP in current prices (nominal) / price index
where is the UK on GDP world wide
sixth largest
what was the UK GDP in 2022?
£2.2 trillion
what industry is the largest in the uk?
services- 80% of employment in 2022 and economic output
what are the 6 largest economies in order
USA, China, Japan, Germany, India, UK
what does GDP per capita help us to understand
the standard of living in a country
what is the formula for GDP per capita
total GDP / size of population
what is GDP per capita
economic output per person
which sector provides 80% of all economic output
services
what is gross domestic product (GDP)
the total value of all goods and services produced in an economy in a year
or
the total value of all spending in an economy in a year
what is the expenditure method of measuring GDP
the total value of all spending in an economy in a year
what is the output method of measuring GDP
the total value of all goods and services produced in an economy in a year
what is purchasing power parity (PPP)
a way of adjusting the exchange rates to take into account different costs of living in different countries
what is the circular flow of income
a model of the economy showing the exchange of the factors of production between households and firms.
It also shown the flow of income between households and firms
what are the injections into the circular flow of income
gov spending
exports
(foreign direct) investment
what are the withdrawals/leakages from the circular flow of income
taxation
savings
imports
what does the rule of 70 do?
estimate how long it takes an economy to double in size
how is the rule of 70 calculated
70/annual % growth in GDP
how do you calculate index numbers
new value/base year value x100
how do you find the % change between base year and another
find the difference between base index number (100) and the other index number
how do you find the % change between two non base years
new-old/old x 100
(percentage change formula)
what is net exports
the value of exports - the value of imports
what are the 4 main categories of government spending (public spending)
current expenditure - spending on the day to day running of public services e.g teachers pay - it is part of Consumption
capital expenditure - investment in capital equipment for the future e.g a school. it is part of government spending. may shift out LRAS
transfer payments - payments made by the government to individuals e.g pensions, tax credits and benefits. part of consumption
debt interest - payments to the holders of government debt e.g government bonds
