GDP Flashcards
What is real GDP?
the value of GDP adjusted for inflation
What is nominal GDP?
the value of GDP without being adjusted for inflation
Whats the formula for Real GDP?
(nominal GDP/GDP deflator) x 100
Whats the formula for GDP deflator?
(nominal GDP/real GDP) x 100
Formula for output growth?
(real GDP in Year 2 - Real GDP in year 1)/real GDP in year 1 x100
What is GDP?
total value of goods and services produced in a economy
How do you calculate GDP through expenditure approach?
consumer spending (C), government spending (G), business investments (I), and net exports (X-M)
What is national expenditure equal to?
national expenditure = national income
How to measure economic growth?
Increase of Real GDP
What is per capita?
Divide by population
What are PPP adjustments?
Purchasing Power Parities
a money conversion rate used to express the purchasing powers of different currencies
What is GNI
GDP+net income earned abroad
Limitations of real GDP?
The failure to indicate whether the nation’s rate of growth is sustainable or not
Doesnt take environemental factors into account
Doesnt measure economic inequality
Doesnt measure non financial activities
What is the economic cycle?
The actual growth in the quantity of goods and services is measure by percentage change in GDP.
What are the 4 stages in the economic cycle?
Boom
Recession
Slump/Depression
recovery
Whats on the Economic cycle diagram?
X axis=Time
Y axis=percentage change of GDP
Straight line positive gradient called trend growth
Then a line going up then going down the going back up
The squiggly line is called the actual growth rate
What type of pressure is there when theres a negative output gap?
Recesionary pressure
What type of pressure is there when theres a positive output gap?
Inflationary pressure
Characteristics of the boom stage?
Economy is working beyond full employment
Tax revenue is high
Consumption and investment expenditure is high
Inflationary pressure
Low unemployment rates
National income is high
Characteristics of the slump stage?
low consumer spending + business investment
rapidly rising unemployment
prices may start to fall
Characteristics of recession stage?
decline in economic activity
rising unemployment rates
weak output
Characteristics of recovery stage?
Increased GDP
Declining unemployment rates
restored consumer and investor confidence
Difficulties of measuring output gaps?
Changes in exchange rate
data is not always reliable
extrapulating data from past trend might lead to uncertainties
Whats a recession?
fall in GDP in 2 successive quarters
