GDP Flashcards
What is macroeconomics
the study of the economy as a whole
what does fiscal refer to
the government taxes and spending
what is a stock value
a measure that captures a quantity at a given time eg amount of moeny in a current account
what is a flow value
a measure that captures quantity over a period of time eg monthly paycheck
what are the two things that GDP represents
countries total income and total expenditure, these are the same
why is total income and total expenditure the same
beacuse every earning of someone is spending of another
Define GDP
market value of all final gooods and services produced within a given country in a given period of time
what does GDP stand for
gross domestic product
what is the difference between GDP and GNP
GDP is what is produced within the physical borders of the country, GNP is what is produced by a countries nationals
what does market value mean
what people pay for it
what does a final good mean
not intermediate goods eg IPhones not screens, buttons
why does it only count final good
to avoid double counting
does GDP count resale of goods? eg buying a second hand car
no only new selling goods
if an intermediate good isn’t made into a final good by the end of the year when GDP is calculated, is it counted
yes and taken away from price of final good next year
is Irelands GDP or GNP bigger? why?
GDP as ireland has many MNCs opertaing here
define GNP
the value of all income earned by a given nation’s residents over a period of time, regardless of where it is earned
what are the four components of GDP
Consumption
Investment
Government spending
Net Exports
what does consumption include
any spending on final goods by households
what does investment include
firm spending on capital and equipment
newly built houses
what does government spending include
sum of all goods and services purchased by the government eg hospitals, vaccines, education
what does government spending not include when counting GDP
Transfer payments including social welfare payments (purchases which arent made in order to get tangible goods in return)
how to calculate net exports
all exports - all imports
what additional component is needed to calculate GNP
net factor income from abroad
what is the difference between real and nominal GDP
real gdp is measured using a fixed base price from some year
nominal gdp is measured using the current value of the goods
which grows faster generally Nominal GDP orreal GDP
nominal
what does the GDP deflator measure
how much prices are changing
how to calculate the GDP deflator
nominal GDP/ Real GDP
What does GNI stan dfor
gross national income
what is GNI equal to
GNP
Some limits related to GDP
Accounting for illegal activities?
value of leisure time and those who unpiad work at home?
value of public goods
potential raise in GDP after wars/disasters eg new buildings after earthquake will show a growth
some bad things are produced eg pollution
says nothing about distribution of wealth
is money == happiness
alternatives to measuring wellbeing rather than GDP
human development index
happy planet index
(life expectancy, % in 3rd lvl edu, equality, sanitation facilities, nutrition, employment)
benefits of GDP
Easy to compute
reliable
everyone has dofferetn benchmarks for happiness
Is nominal or real GDP better at showing growing ecoomies
real, not affected by inflation
if a jump in prices was due to tech development, is real or nominal gdp a better measure of growth
nominal
its not inflation but a perm price change
what is rule of 70
if some varibale grows at x% per year, then that variable doubles in approx 70/x years
why do governments invest in education to encourage growth
investment in human capital is likely to lead to developments in technology which in turn increase efficiency and productivity
what is gross investment
the total spending on capital stock per period in a country
what is net investment
spending on capital stock taking into account spending on deprication of the existing capital stock
define productivity
quantity of goods and services that a worker can produce in a specific period
what is human capital
knowledge and skills
what is technological knowledge
societies understanding on how the world works and the best wya to produce goods and services(quality of human and physical capital)
do natural resources limit our possible growth?
will the fixed supply of limited natural resources eventyually run out?
technology imporvements have allowed less natural resourcesto be used eg cars now use way less petrol than before
scarcity is reflected in market prices and rn, prices of natural resources arent extremelt high meaning they are not scarce
why do governments want to encourage investment by firms
the correlations between investment and growth is strong meaning the standard of living in the country can improve
what is the catch up effect
when the economy has a low level of capital an extra unit of capital leads to a large increase in output eg changing from traditional farming methods to machinary. This is so these low capital countries can catch up to the high capital countries
in the countries with high level of output already, each new until of capital will result in a small increase in output
Explain why an economy’s income must equal its
expenditure.
every spending of one person in an economy is the earnings of another and vice versa
Many years ago, Jamanda paid €500 to put together
a record collection. Today she sold her albums at
a car boot sale for €100. How does this sale affect
current GDP?
it wont because GDP only accounts for the sale of new goods
