economic growth, living standards Flashcards
what is the diference between GDP and GNI ?
GNI = GDP + net income from abroad
GNI measures the flows in and out of the country.
what is PPP?
purchasing power parity is the comparison of currency value in countries and comparing how much g/s the currency can buy in each contry.
- big max index
- look at the price of baskets of goods at different locations
standard of living definition
- the amount of goods and services that households have assess to
- a measure of welfare of people living in an economy
- financial health of a population
why does a rise in national income lead to an improvement in living standards ?
- households can afford more goods and services
- afford better housing and better food
- gov can provide more public services such as education and health care
- households can work less and take holidays
why might a rise in national output lead to a decrease or no effect in living standard?
- a rise in income inequality
- increase in pollution and deterioration of the environment
- a rise in poplulation may actually mean that the income per head actually shrinks
what are the problems with using GDP to compare living standards ?
- doesnt look at pollution or envirmonment
- doesnt look at the distribution of income only looks at the whole economy
whats the shadow economy ?
economic activities that are hidden from the governement including both illegal and legal activities.
e.g. illegal activities , services (cash) , voluntary work
how did china achieve rapid economic growth ?
investment , low wages and export driven
+what is long run economic growth and what causes it ?
increase in aggeragate supply.
caused by :
- changes in the quantity or quality of factors of production
- advancements in technology
what are the costs of economic growth?
- resource depletion and environmental degration (non-renewable resources become used up, irreversible environmental change)
- Inflation - growth caused by rising AD can only be sustained if AS increases too
- larger current account deficit
- increasing income inequality
what are the characteristics of a boom ?
- strong and rising AD
- employment rises and real wages rise
- increased demand for imports as incomes rise
- increasing government tax revenue
- rising productivity as output of firms increase
- inflation
what are the characteristics of a recession?
- rising unemployment as firms lay off workers to keep down there costs
- fall in business confidence/profits/investment
- fall in demands for imports
- increased governement borrowing
when if there an output gap?
output gap occurs when there is a difference between the actual and potential output
what is economic wellbeing?
multi-dimentional concept which aims to provide a more comprehensive measure of living standards, quality of life and GDP . it takes into acount :
- health
- education
