Measure Of Economic Performance Flashcards
Define GDP
Gross Domestic Product. The value of all goods and services produced domestically in an economy in one year period.
Define Nominal GDP
The real value of all goods and services produced domestically in one year period without adjustment for inflation.
Define GDP per capita.
GDP per capita is the total GDP divided by the population of an economy. It is a measure of mean wealth of each citizen in the country.
What is GNI?
Gross national income. GDP plus the income earned by citizens operating outside the country.
Define Gross National Product (GNP).
GDP plus income from abroad minus income sent by non-residents to their home countries.
What are purchasing power parties(PPP)?
Exchange rate conversion factors that calculate the relative purchasing power or cost of living of different currencies.
What are limitations of using GDP for comparisons?
– lack of information provided on inequality;
– quality of goods and services;
– does not include voluntary work; a line
– difference in hours worked;
– environmental factors.
Define The Easterlin paradox
Concept that national happiness and rises in income have a direct relationship but only up to a point, beyond which the relationship is less evident.
Which approach to measuring GDP adds up all the expenditure in economy?
The expenditure approach.
What is inflation?
Inflation is the sustained increase in average price level of goods and services in an economy.
Define deflation.
The sustained fall in average price level of goods and services.
What is disinflation?
Disinflation is when a price level is rising, but at a slower rate than previously.
What is disinflation?
Disinflation is when a price level is rising, but at a slower rate than previously.
What is the consumer price index(CPI)?
The consumer price index is a measure of average price level of goods and services in economy.
What is demand pull inflation?
Demand pull inflation is caused by excess aggregate demand over the aggregate supply in an economy.
What is cost push inflation?
Cost push inflation is caused by increases in costs of production in the economy.
What is cost push inflation?
Cost push inflation is caused by increases in costs of production in the economy.
What is wage-price spiral?
The wage-price spiral is when increased wages lead to higher prices, which in turn leads to demands for higher wages
What are the limitations of using CPI?
– does not include housing costs;
– ignores regional differences;
– does not capture the quality of the product;
– the CPI only measures changes in consumption on an annual basis, index is always behind;
– errors in data collection (small samples and not enthusiastic respondents).
What is the retail price index?
The retail price index is the CPI including the certain goods (council tax, mortgage interest payments, estate agent fees).
What is considered to be unemployed?
Not working but actively seeking for work
What is labour force?
Actively working ages between 16 to 65.
Economically inactive
Not working between 16 to 65 (e.g. students)
Non labour force
Not seeking for work (e. g. stay at home parents, pensioners, school children)
