Economic Growth Definitions

Question 1

GDP (2)

Answer 1

Gross Domestic Product is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period (1). GDP is usually calculated on an annual basis, although it can be calculated on a quarterly basis as well (1).

Question 2

GNP (2)

Answer 2

Gross national product is the market value of all the goods and services produced in one year by labour and property supplied by the citizens of a country (1). Unlike gross domestic product, which defines production based on the geographical location of production, GNP allocates production based on location of ownership (1).

Question 3

GNI (2)

Answer 3

The gross national income (GNI) is the total domestic and foreign output claimed by residents of a country (1), consisting of GDP plus incomes earned by foreign residents, minus income earned in the domestic economy by non-residents (1).

Question 4

Nominal GDP (2)

Answer 4

Nominal GDP is measured at current market prices (1). Therefore, nominal GDP will include all of the changes in market prices that have occurred during the current year due to inflation or deflation (1).

Question 5

Real GDP (2)

Answer 5

Real GDP is the value of economic output adjusted for price changes i.e., inflation or deflation (1). It is often referred to as “constant-price,” or “inflation-corrected” GDP (1)

Question 6

GDP per Capita (2)

Answer 6

This is the value of total output of the country divided by the average (or mid-year) population for the same year (1) to provide the average income for a country (1).

Question 7

GDP (PPP) (1)

Answer 7

Comparisons using Purchasing Power Parity are more useful when assessing a nation’s GDP/capita because PPP takes into account the relative cost of local goods (1).

Question 8

Economic growth (2)

Answer 8

True (potential) economic growth is the percentage increase in the potential maximum output of an economy in a given time period, usually a year (1). Difficulties in measuring potential output however means that economic growth is usually measured as percentage increase in GDP in a given year (1).

Question 9

National happiness (3)

Answer 9

Gross National Happiness (GNH) is a global indicator of progress, which measures both sustainable economy and social development, while protecting the environment and culture (1). In the UK, the ONS began to collect data on National Wellbeing (1). The ONS describes this as “how we are doing as individuals, as communities and as a nation, and how sustainable this is for the future.” The measures include both objective data (for example, number of crimes against the person per 1,000 adults) and subjective data (for example, percentage who felt safe walking alone after dark) (1).

Question 10

Trade cycle (4)

Answer 10

The economic trade cycle shows how economic growth can fluctuate within different phases, for example: i) Boom (which is high growth causing inflation) ii) Peak (top of trade cycle) iii) Downturn or Recession (fall in economic output) iv) Recovery (upturn of economic growth).

Question 11

Recession (3)

Answer 11

An economic recession is identified when there has been two consecutive quarters of negative economic growth (1). Typical symptoms of a recession include: lower consumption; rising unemployment; rising business failure; falling consumer and business confidence; and rising unemployment and falling tax revenue leading to a worsening budget deficit (2 for any 2 symptoms);

Question 12

Boom (3)

Answer 12

A boom occurs when real national output is rising at a rate faster than the trend rate of growth (1). Symptoms include: fast growth in consumption; rising real incomes; strong confidence; falling unemployment; rising tax revenues, potential inflationary pressure (2 for any 2 symptoms).