Measures of Economic Performance Flashcards
Define GDP (2 Definitions)
The measure of output of goods and services in a country in a given year
The sum of all incomes earned in a country
What are the two meanings of the word “Economic Growth”?
Actual Economic Growth
Potential Economic Growth
Define Actual Economic Growth
An increase in real incomes or Gross GDP
Define Potential Economic Growth
An increase in productive capacity within a country
Why is Economic growth not the same as GDP?
Because Economic Growth is REAL GDP (adjusted for inflation)
What are the three flows in the Circular flow of income?
Goods
Income
Expenditure
Is higher GDP always a good thing?
No, it can sometimes mean people are working more due to an increased cost in living, work pressures or longer hours. Means more pollution (social Costs)
How would you manipulate GDP to measure standards of living?
GDP per Capita (if GDP rises 10% but population rises 20% then people are worse off)
What are Real Values?
Values adjusted for inflation
What are nominal Values?
Current raw figures
What is the difference between Values and Volumes?
Volume is the raw amount but value is how much, e.g. China has a larger volume of exports but Germany has a higher Value (less exports but higher prices)
What is the Difference between Real Prices GDP and Current Nominal GDP?
Real Values have the effects of Inflation removed
Define GNP (Gross National Product)
Total value of all goods and services produced by domestic population (GDP) plus incomes from abroad and minus incomes claimed from non population
What is the problems with GNP?
If stocks and bonds form another country are owned then GNP may be bigger than GDP.
Define GNI (Gross National Income)
GDP plus income paid by other countries for interest and dividends
