Definitions

Question 1

Define GDP

Answer 1

Gross Domestic Product is the output of a country’s economic activity, the value of goods or services produced by an economy.

Question 2

Define GNI

Answer 2

Gross National Income measures the income generated by a country (including abroad) GNI and GDP are used to measure the level of wants and needs as they represent levels of money spent on goods and services

Question 3

HDI

Answer 3

Human Development Index considers GNI per head, life expectancy, and mean years of schooling, so it can be seen as better. However, it can overlook inequality, poverty, and lack of empowerment.

Question 4

Key economic agents

Answer 4

1) individuals/consumers - gain economic welfare from purchasing goods and services
2) firms - maximise profits, build brands, provide jobs, meet needs (economic welfare)
3) government - facilitate utility, laws and regulations, provide key services in society, control key

Question 5

Market economy

Answer 5

In a market economy, the free market mechanism and market forces determine what to produce and how much. Supply and demand drive production decisions without government intervention.

Question 6

Mixed economy

Answer 6

In a mixed economy, the market largely dictates production but the government intervenes to correct negative effects caused by market forces. Governments regulate merit and demerit goods, along with market failure and positive or negative externalities.

Question 7

Planned economy

Answer 7

In a planned economy, the government decides what goods or services will be produced, how much, and when- central control.

Question 8

Market failure

Answer 8

Market failure occurs whenever a market leads to a misallocation of resources in an economy, either failing to provide a good or service, or just the wrong quantity. E.g monopolies p, healthcare, inequality, merit/demerit goods, unemployment, public goods, information asymmetry, and environmental damage.