Growth Flashcards
How do you measure nominal GDP
Measured by adding up prices
What could cause a decrease in Nominal GDP?
A decrease in output or a decrease in price(deflation)
What is economic growth
An increase in real GDP
What is the formula for real GDP growth?
Real GDP growth = %change in Nominal GDP growth- Inflation rate
RGDP per capita formula
RGDP per capita = RGDP/size of population
What is economic development
Improvement of living standards
What is PPP
Purchasing power parties
What are the 5 limitations of RGDP
Ignores population changes
Ignores income distribution
Ignores types of goods and services
Ignores underground economies
Ignores
Subsistence economies
In Saudi Arabia RGDP increased after discovering oils, but
The higher income was not distributed equally, the-royal family kept the higher income for themselves, so living standard for the rest of the population didn’t change at all.
How many people are obese due to an increase in consumption for unhealthy food
35% are obese and 1 in 4 die from heart attacks each year. RGDP can increase but living standards may decrease
The underground economy is also known as the.
Black market economy or shadow economy.
Illegal transactions meaning you cannot accurately measure GDP as you are missing data
In the uk the underground economy is estimated to be worth around £150 billion
What is a subsistence economy
When people produce and consume their own stuff, which is not recorded therefore measuring RGDP is inaccurate
What causes economic growth
When AD OR AS shift right/ outward
What causes an outward shift in AD
Increase in consumption
Investment
Gov spending
Exports
Decrease in imports
What causes an outward shift in As
SRAS will shift outwards if costs decrease
Keynesian or Classical LRAS will shift outwards if the quantity or productivity of the FOP increases
