GDP and standards of living Flashcards
1
Q
what is GDP per capita
A
the average economic output per person in a country
2
Q
what does GDP per capita measure
A
standards of living
3
Q
how do you calculate GDP per capita
A
total GDP / population
4
Q
what is real GDP per capita
A
the per person value of all final goods and services when adjusted for effects of price inflation
5
Q
what are the benefits of real GDP per capita
A
- it takes population size into account
- allows assumption that as real GDP per head rises, living standards also rise
- standard measure
6
Q
what are the limitations of real GDP per capita
A
- ignores distribution of income
- ignores negative externalities of production (pollution etc)
- ignores other QoL aspects
- does not take account of factors reducing average discretionary income
- doesn’t reflect the proportion of output on consumer goods compared to capital goods
- remittances are not included
7
Q
what is the Easterlin paradox
A
life satisfaction does rise with average income but only up to a point beyond that marginal gain in happiness declines (DMU)
