ECONOMIC GROWTH KEY QUESTIONS Flashcards
What does aggregate mean?
Aggregate can also mean “total”,
total unemployment= aggregate unemployment
What is macroeconomics?
two definitions
Macroeconomics is concerned with the economy as a whole, large scale.
The study of interrelationships
at an aggregate level.
How do we judge whether an economy is performing well?
5 reasons
Economic growth, GDP, Inflation rate, unemployment, balance of payments.
Name 3 sources of data for an economist.
Is there much alternative to this data?
(ONS) Office of national statistics which is data for the UK.
(IMF) International Monetary Fund.
the United Nations.
(little alternative to this as collecting data is time consuming and expensive)
How do you calculate percentage change?
NEW- OLD divided by OLD x 100
CHANGE/OLD x 100
What is an index number?
- How do you calculate index numbers?
- What is the base number?
- A device for comparing prices or quantities compared to a base number.
- Raw number/ raw base number x 100
- the base number is always 100
Define underlying rate of economic growth?
The long run average rate of economic growth for a country over a period of time. (long term)
What is actual rate of economic growth?
contrast this to Underlying economic growth.
The percentage annual increase in a country’s GDP.
This contrasts to underlying economic growth because that is a long run average.
- What is potential economic growth?
2. what can it also be called?
- Measure by the country’s potential change in level of output.
2 AKA trend growth.
How would you show economic growth on a diagram?
- PPF (production possibility frontier diagram)
2. economic cycle diagram
How is real GDP calculated
Growth of GDP In a period - rate of inflation
What is the nominal GDP? why Is it bad
Nominal GDP Is GDP not adjusted for inflation. can be misleading
Distinguish between total and per capita GDP.
- Total GDP is the total output of the economy.
- GDP per capita is the total output of the economy divided by its population.
Distinguish between volume of GDP and value of GDP
volume of GDP is how many products and services are made.
value of GDP is monetary value of goods and services created in a time period.
- What is meant by gross national product?
- Gross national product is the total value of all products and services owned by a country’s residents.
This means that GNP can factor in output that has occurred outside the borders.
What is gross national income? (GNI)
GNI = GDP + net income from abroad.
What is Purchasing Power Parities?
Purchasing power parities means equalising the purchasing power of two currencies by taking into account inflation and cost of living.
Why do we use PPP adjusted figures for international comparison?
Because they are a better option to exchange rates that do not take into account cost of living and rate of inflation and exchange rates change frequently.
What are the limitations in using GDP to measure living standards?
Because GDP is just the total output of goods and services so it does not account for environmental quality, level of health, inequality of income and increases in technology.
What problems are there when comparing economic growth between developed and developing countries?
- The growth in economy for developing countries will be a higher rate
- as they are in a different stage in economy compared to developing countries.
What is meant by gross national happiness?
it is an alternative way to measure economic performance to GDP.
- it has four pillars that are:
- good governance
- sustainable development
- promotion of culture
- and environmental conservation
Is there a link between income and happiness?
it could be suggested there is a link between income and happiness because a higher income can get you
more luxuries. But there is no direct correlation between the two.
What is the human development index (HDI)
A statistical tool used to measure a country’s achievement socially and economically.
It takes into account: health, educational attainment and standard of living.
How is HDI calculated
The mean of:
life expectancy
education
and GNI per capita.
What are 4 other measures of standard of living?
Median household income,
GDP per capita,
Happy planet index,
Life expectancy.
