Key Economic Indicators Flashcards
What are the four macroeconomics objectives/aims?
B - Favourable balance of trade
U - Low unemployment rate
G - Sustainable and Inclusive economic growth
P - Price stability
What is the economic indicator of favourable balance of trade?
Balance of Trade
What is the economic indicator of full
employment?
Unemployment rate
What is the economic indicator of a sustainable and inclusive economic growth?
Real GDP growth (economic growth), Gini coefficient (inclusive growth), pollution index (sustainable growth)
What is the economic indicator of price stability?
Inflation rate
Define economic growth.
Economic growth can be defined as an increase in real national income (or output) of an economy over a specific time period, usually a year.
Economic growth is most commonly measured by the percentage change of an economy’s real Gross Domestic Product (GDP).
What is the three types of economic growth?
Sustained economic growth, sustainable economic growth and inclusive economic growth
Define sustainable growth.
Sustainable growth means that the rate of economic growth can be maintained without creating other significant economic problems for future generations.
Define inclusive economic growth.
Refers to economic growth where the benefits of growth are distributed across society.
Economic growth should also be inclusive so that the rate of growth is not only sustained over a period of time, but also broad-based across economic sectors and
creates productive employment opportunities for the majority of the country’s population.
Define GDP.
Gross Domestic Product (GDP) is defined as the total market value of all final goods and services newly-produced within the geographical boundaries of an economy in a given period of time (usually a year).
How to convert nominal GDP to real GDP?
Given nominal GDP level should be divided by the GDP Deflator and multiply it by 100.
ie. Nominal GDP/GDP Deflator x 100%
How to convert nominal GDP growth to real GDP?
Subtract change in the general price level (i.e inflation rate)
ie. % change in real GDP = % change in nominal GDP − Inflation rate (%)
How to convert Real GDP to Real GDP per capita?
Given real GDP level should be divided by the population size and multiply it by 100.
ie. Real GDP/Population size x 100%
How to convert real GDP growth to real GDP per capita?
Subtract change in the general price level (i.e inflation rate)
ie. % change in real GDP = % change in nominal GDP − Inflation rate (%)
What is the relationship between GDP and GNI?
Real GNI = Real GDP + net factor income from abroad
Real GNI = Real GDP + factor incomes earned by residents overseas - factor income earned
What are the uses of national income statistics?
- To measure economic growth
- To compare economic growth (ie over time, across space)
- To measure the contribution of income from different sectors of the economy
What are some limitations of using national income statistics to measure economic performance?
The statistics do not reveal the extent to which sustainable growth and inclusive growth happen.
Define the material aspect of SOL.
Material aspect of SOL refers to the quantity and quality of goods and services available for consumption by residents in a country.
State the limitations of using National income statistics to measure material SOL.
a. Changes/differences in distribution of national income
b. Changes/difference in composition of national income
c. Changes/difference in population size
d. Changes/difference in size of non-monetary sector
e. Changes/differences in availability of reliable data and approaches accounting
f. Differences in currencies and changes in exchange rate
Define non-material aspect of SOL.
Non-material aspect of SOL refers to intangible aspects which enables residents in a country to have an enjoyable and fulfilling life.
Limitations of national income statistics in comparing non-material SOL
a. Changes/differences in access to necessities
b. Changes/differences in quality of the environment
c. Changes/differences in leisure hours
What is the Gini coefficient and how is it calculated?
The Gini coefficient is an indicator to reflect income distribution and measures the extent to which the distribution of income or consumption expenditure among individuals or households within an economy deviates from a perfectly equal distribution.
Gini coefficient = Ratio of the lines between the line of equality and the Lorenz curve/Total area until the line of equality.
(Has a value between 0 and 1)
How do you calculate the Human Development Index (HDI)?
Standard of Living (using purchasing power parity rate) + Education (Literacy Rate) + Health (Life Expectancy)
The HDI produces a value between 0 (low development) to 1 (high development)
How do you calculate Green GDP?
Green GDP = GDP - the value of environmental degradation - expenditures resulting from cleaning up pollution to avoid further environmental damage
