Measures of economic performance: economic growth Flashcards
What is the best source of official economic statistics in UK?
Office for National Statistics
Define nominal GDP
the value of Gross Domestic Product based on current prices, taking no account of prices changing over time
Define real GDP
an estimate of the volume of Gross Domestic Product, taking no account of prices changing over time
When prices are rising, will use of nominal GDP over- or under-state the growth in volume of GDP?
overstate
How can you calculate a simple price index from GDP figures?
100 * nominal GDP / real GDP
What is an index number?
a device for comparing the value of a variable in one period or location with a base observation
Define potential economic growth
an expansion in the productive capacity of an economy
Define gross domestic product
a measure of the economic activity carried out in the domestic economy over a period
Define gross national income
GDP plus net income from abroad
Define actual economic growth
rate of growth of real GDP in a period
What is the trade or business cycle?
where GDP fluctuates around its underlying trend, following a regular pattern
Define seasonal adjustment
process to smooth seasonal variations in a veriable to reveal the underlying trend
What does per capita mean?
per person
What are the four advantages of using GNI per capita to measure economic growth?
- clearly defined and understood
- an agreed international standard
- widely available for many countries
- takes account of population size
What can distort GNI per capita as measure of economic growth?
- quality of data collection
- exchange rate effects
What does GNI per capita ignore that are relevant to considerations of standard of living?
- inequality in income distribution
- informal economic activity
- health and education levels
- impact of environmental change
- wellbeing and happiness
Define purchasing power parity exchange rate
An exchange rate adjusted to reflect relative purchasing power of incomes in different countries
How is *purchasing power parity exchange rate *calculated?
Cost of a “basket” of common good in each country divided by cost in other countries
Does the PPP exchange rate tend to show lower income countries better or worse off than looking at GNI per capita?
Better
What UN measure allows for wider issues than just income in measuring standard of living?
Human Development Index, which consider GNI, health and education
Name five countries that showed strong GDP growth 1990-2019.
China, South Korea, India, Malaysia, Chile
What causes negative economic growth in almost all countries in 2020?
Covid-19 pandemic
What does the ONS’s Measuring National Well-Being Programme do?
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.
What is the Easterlin paradox?
Happiness increases with average incomes but only up to a point, probably because happiness is influenced by relative position in society
