Measures of Economic Performance Flashcards
What are the four factors of production?
1) Capital
2) Enterprise
3) Labour
4) Land
Who owns these factors of production?
Owned by households
What are the four factor incomes?
1) Interest
2) Profits
3) Wages
4) Rent
What is a factor income
A reward for providing factors of production
How do households and firms interact?
Households provide firms with FoPs
Firms provide households with goods and services
How do households and government interact?
Households give the government income tax
Government gives households public services and transfer payments
How do firms and government interact?
Firms give the government corporation tax
Government gives firms grants and subsidies
How do households and banks interact?
Households save in banks
Banks provide interest
How do firms and banks interact?
Firms save in banks
Banks provide loans and interest
How do government and bank interact?
Government gives bank
Name three leakages in the economy
1) Imports
2) Taxes
3) Saving
Name three injections in the economy
1) Exports
2) Government spending
3) Investment
How does the level of national income rise?
When the number of injections increases. Also, leakages increase as well
Name a critique of GDP
“It’s purely a measure of money and not how it’s used - disregards other factors”
What is GDP?
GDP is the value of all the final goods and services produced in an economy
National income, expenditure and output equation
National income = National Output = National Expenditure
What is the difference between income and wealth
Income is the amount of money received on a regular basis (salary/wage, or dividends)
Accumulation of assets (property, cars, jewellery, stocks and shares)
GDP Rank
1) US
2) China
3) Japan
4) Germany
5) UK
6) India
7) France
8) Italy
9) Canada
10) South Korea
What is GNI?
Gross National income - measures income (wages, salaries and investments) generated by the countries’ citizens
What is GNP?
Gross National Product - Is the market value of all the goods and services produced in one year by labour and property supplied by the citizens of a country
What is nominal value?
Provides a measure in simple monetary terms
What is real value?
Provides a measure where the nominal value is adjusted for inflation
What is total GDP?
Total GDP is the sum of all the output divided by spending from everyone in the economy
What is GDP per capita?
Divides the total population
- Is more accurate
-
Alternatives to GDP
HDI, GNP, GNI
What is HDI?
- Measures broader definition of well-being and provides a composite measure of three basic dimensions of human development: a long life, access to knowledge and a decent standard of living
- Expected and mean years of schooling
- GNI per capita
- Life expectancy
What is GPI?
- Takes into account GDP and cost of negative effects related to economic activity
- E.g., Cost of crime, cost of ozone depletion, cost of recourse depletion
- It nets the positive and negative results of economic growth
What is HPI?
Concentrates on the deprivation in the three essential elements of human life (same as HDI):
- Longevity, Knowledge, and a decent standard of living
What is the gini coefficient
Measure of statistical dispersion most prominently used as a measure of inequality of income distribution or inequality of wealth distribution
- Rated between 0 and 1
- Or 0 and 100
- 0 being no inequality
What is the Easterlin Paradox?
States that at a point in time, happiness varies directly with income, both among nations and within nations, but over time the long-term growth rates of happiness and income are not significantly related.
