Measures of Economic Performance

Question 1

What is economic growth a measure of?

Answer 1

An increase in real gross domestic product (GDP)

This is referred to as actual economic growth.

Question 2

What does GDP represent?

Answer 2

The total amount of goods and services produced in a country in 1 year, or the total amount spent, or the total amount earned.

Question 3

What is potential economic growth?

Answer 3

A measure of the increase in the productive capacity of an economy, shown by a movement outwards of the PPF curve.

Question 4

What defines a recession?

Answer 4

Two consecutive quarters of negative economic growth.

Question 5

What are the effects of a recession on spending, income, and output?

Answer 5

Less spending, income, and output, likely leading to firm closures, increased unemployment, and a fall in living standards.

Question 6

When did recent UK recessions occur?

Answer 6

2008 following the global financial crisis and 2020 following the COVID-19 pandemic.

Question 7

What is nominal GDP?

Answer 7

The money value of all goods and services produced by a country in 1 year.

Question 8

What is real GDP?

Answer 8

Nominal GDP adjusted for inflation, allowing measurement of changes in the volume of output over time.

Question 9

How is GDP per capita calculated?

Answer 9

By dividing GDP by the country’s population.

Question 10

What was the total GDP in the UK in 2019?

Answer 10

$2.93 trillion.

Question 11

What was the GDP per capita in the UK in 2018?

Answer 11

$46,867.

Question 12

What was the GDP per capita in India in 2018?

Answer 12

$6,670.

Question 13

What does a falling rate of economic growth indicate?

Answer 13

Real output is still rising but at a slower rate.

Question 14

What does economic growth refer to?

Answer 14

A change in the level of real GDP, specifically a percentage change.

Question 15

True or False: GDP per capita is total GDP divided by the population.

Answer 15

True.

Question 16

Fill in the blank: Real values are sometimes referred to as _______.

Answer 16

constant prices.

Question 17

What happens to total population figures when looking at GDP?

Answer 17

They cannot be assumed to be constant.

Question 19

What does ‘real’ GDP mean?

Answer 19

Real GDP means that inflation has been taken into account.

Real values are sometimes referred to as constant prices.

Question 20

What is the clinical definition of a recession?

Answer 20

A recession is when an economy has two consecutive quarters of negative economic growth.

Question 21

How long is a quarter in economic terms?

Answer 21

A quarter is three months.

Question 22

What does a falling rate of economic growth indicate?

Answer 22

It indicates that real output is rising but at a slower pace.

Question 23

What is economic growth a change in?

Answer 23

Economic growth is a change in the level of real GDP.

Question 24

What does GDP per capita refer to?

Answer 24

GDP per capita refers to GDP divided by the total population.

Question 25

Why is GDP per capita a better indicator of standards of living?

Answer 25

GDP per capita is a better indicator of standards of living than total GDP.

Question 26

What does the volume of output measure?

Answer 26

The volume of output measures the number/amount of goods produced.

Question 27

What does the value of output measure?

Answer 27

The value of output measures the amount of goods produced multiplied by the price at which they are sold.

Question 28

Does an increase in volume of output always mean an increase in value of output?

Answer 28

No, an increase in volume of output does not always mean an increase in value of output.

Question 29

What is Gross National Income (GNI)?

Answer 29

GNI measures income received by a country both domestically and via net incomes from overseas.

Question 30

How is GNI calculated?

Answer 30

GNI = GDP + profits from companies operating abroad + income earned from nationals living abroad - profits from foreign-owned companies - income earned from foreign nationals living in the country.

Question 31

What can cause GNI to be much less than GDP?

Answer 31

GNI may be much less than GDP if much of the income from a country's production flows to foreign people or firms.

Question 32

What are purchasing power parities (PPPs)?

Answer 32

PPPs are used to compare GDP in different countries, taking into account the cost of a 'basket of goods' in each country.

Question 33

What does the PPP exchange rate do?

Answer 33

The PPP exchange rate equalizes the purchasing power of different currencies by eliminating differences in prices between countries.

Question 34

True or False: The exchange rate on the currency markets can differ from the PPP rate.

Answer 34

True.

Question 35

What is the significance of GDP at PPP?

Answer 35

GDP at PPP provides a more accurate means of comparing living standards than nominal GDP data.

Question 36

What factors does the standard of living encompass?

Answer 36

The standard of living encompasses income, housing, health, the environment, and safety.

Question 37

What is quality of life a measure of?

Answer 37

Quality of life is a measure of living standards that takes into account more than just income.