Economic Growth (MAC) Flashcards
What is economic growth?
Economic growth is a measure of an increase in real gross domestic product. This is referred to as actual economic growth.
What does real mean?
Means that inflation has been taken into account. Real values are sometimes referred to as constant prices. If inflation is left in the figures they are knowns as nominal or current.
What is GDP?
It is the total amount of goods and services produced in a country in 1 year or the total amount spent or the total amount earned.
What is potential economic growth?
It is a measure of the increase in the productive capacity of an economy.
What is a recession?
When an economy suffers two consecutive quarters of negative economic growth.
What is nominal GDP?
Is the value of all goods and services produced by a country in 1 year.
What is real GDP?
It is the nominal GDP adjusted for inflation. With real GDP it is possible to measure changes in the volume of output over time.
What is GDP per capita?
It is the total GDP divided by population. GDP per capita gives a better indicator of living standards.
What does the volume of output of GDP measure?
It measures the number of goods produced.
What does the value of output of GDP measure?
Measures the amount of goods produced multiplied by the price at which they are sold.
What is gross national income?
GNI measures the income received by a country both domestically and via net incomes from overseas
How is GNI calculated?
GDP + profits from companies operating abroad and income earned from nationals living in foreign countries
What are purchasing power parities?
When the values of income are expressed at PPP it means that the exchange rate used is the one where the same basket of goods in the country could be bought in the USA at this currency of exchange.
What is the quality of life?
It is a measure of living standards that takes into account more than just income.
What are the limitations to GDP to compare living standards between countries?
Difference in population
Differences in the rates of inflation
How much output is self consumed (so it doesnt appear on the GDP)
Methods of calculation and reliability of data may differ
Type of spending by government
Differences in income distribution
Differences in exchange rates
