Measures of economic performance: economic growth

Question 1

What is the best source of official economic statistics in UK?

Answer 1

Office for National Statistics

Question 2

Define nominal GDP

Answer 2

the value of Gross Domestic Product based on current prices, taking no account of prices changing over time

Question 3

Define real GDP

Answer 3

an estimate of the volume of Gross Domestic Product, taking no account of prices changing over time

Question 4

When prices are rising, will use of nominal GDP over- or under-state the growth in volume of GDP?

Answer 4

overstate

Question 5

How can you calculate a simple price index from GDP figures?

Answer 5

100 * nominal GDP / real GDP

Question 6

What is an index number?

Answer 6

a device for comparing the value of a variable in one period or location with a base observation

Question 7

Define potential economic growth

Answer 7

an expansion in the productive capacity of an economy

Question 8

Define gross domestic product

Answer 8

a measure of the economic activity carried out in the domestic economy over a period

Question 9

Define gross national income

Answer 9

GDP plus net income from abroad

Question 10

Define actual economic growth

Answer 10

rate of growth of real GDP in a period

Question 11

What is the trade or business cycle?

Answer 11

where GDP fluctuates around its underlying trend, following a regular pattern

Question 12

Define seasonal adjustment

Answer 12

process to smooth seasonal variations in a veriable to reveal the underlying trend

Question 13

What does per capita mean?

Answer 13

per person

Question 14

What are the four advantages of using GNI per capita to measure economic growth?

Answer 14

• clearly defined and understood
• an agreed international standard
• widely available for many countries
• takes account of population size

Question 15

What can distort GNI per capita as measure of economic growth?

Answer 15

• quality of data collection
• exchange rate effects

Question 16

What does GNI per capita ignore that are relevant to considerations of standard of living?

Answer 16

• inequality in income distribution
• informal economic activity
• health and education levels
• impact of environmental change
• wellbeing and happiness

Question 17

Define purchasing power parity exchange rate

Answer 17

An exchange rate adjusted to reflect relative purchasing power of incomes in different countries

Question 18

How is *purchasing power parity exchange rate *calculated?

Answer 18

Cost of a “basket” of common good in each country divided by cost in other countries

Question 19

Does the PPP exchange rate tend to show lower income countries better or worse off than looking at GNI per capita?

Answer 19

Better

Question 20

What UN measure allows for wider issues than just income in measuring standard of living?

Answer 20

Human Development Index, which consider GNI, health and education

Question 21

Name five countries that showed strong GDP growth 1990-2019.

Answer 21

China, South Korea, India, Malaysia, Chile

Question 22

What causes negative economic growth in almost all countries in 2020?

Answer 22

Covid-19 pandemic

Question 23

What does the ONS’s Measuring National Well-Being Programme do?

Answer 23

It looks at a range of indicators of quality of life, eg personal well-being, health, education, relationships, environment as well as economy and personal finance.

Question 24

What is the Easterlin paradox?

Answer 24

Happiness increases with average incomes but only up to a point, probably because happiness is influenced by relative position in society