MACRO L2 - National Income

Question 1

what are the 3 ways of measuring GDP

Answer 1

• the product method
• the income method
• the expenditure method

Question 2

what is the product method

Answer 2

sum the value of all the goods and services produced in the country, industry by industry

Question 3

what is the income method

Answer 3

add up all household incomes, that is wages, salaries, profits, rent and interest

Question 4

what is the expenditure method

Answer 4

sum of consumption (C), gov spending (G), investment (I), and net export spending on goods and services (X-M)

GDP = C + G + I + (X-M)

Question 5

what is ‘value added’

Answer 5

• it measures each firms own contribution to total output, the amount of market value that is produced by that firm

Question 6

what is GVA and how is it calculated

Answer 6

GVA - gross added value

the sum of all values added in in an economy (measure of the economys total output)

Question 7

what is GDP

Answer 7

Gross domestic product
- the value of output in terms of the prices actually paid

Question 8

what is GNI

Answer 8

Gross national income
- GDP + net income from abroad

Question 9

what is nominal GDP

Answer 9

GDP measured at current prices

Question 10

what is real GDP

Answer 10

GDP measured in constant prices

Question 11

what does GDP per head measure

Answer 11

(material) living standards

Question 12

what does GDP per worker measure

Answer 12

labour productivity

Question 13

what is PPP exchange rate

Answer 13

An exchange rate corrected to take into account the purchasing power of a currency

PPP - Purchasing-power parity