measures of economic performances 2.1.1-2.1.2 Flashcards
what the the 4 macroeconomic indicators
-rate of economic growth
-rate of inflation
-level of unemployment
-state of the balance of payments
Define GDP
is the standard measure of the value added created through the production of goods and services in a country during a certain period
what does gdp stand for
gross domestic product
what is the difference between real and nominal
NOMINAL gdp is the total value of all goods and services produced in a given time period and REAL is just nominal gdp that has been adjusted with inflation
what is the difference between total and per capita
TOTAL gdp is the total value added created through the production of goods and services in a country during a certain period whereas PER CAPITA is when it is divided by the population
what is the difference between value and volume
VALUE of goods/services shows what certain goods/services are worth. However, the VOLUME shows the number of goods/services that are produced
define gdp per capita
the total gdp divided by the population of the country
how to calculate gdp per capita
total gdp/population
Define GNI
is the GPD plus the incomes earned by UK citizens abroad, minus the income earned earned by non-residents in the uk economy
what does gni stand for
gross national income
define recession
when the economic growth falls into the minuses for more than 2 consecutive quarters
Define PPP
the exchange rate at which one nations currency would be converted into another to purchase the same amounts of a large group of products
what does ppp stand for
purchasing power parties
why may comparing the living standards of 2 countries with different currencies not be accurate
because the exchange rate may not truly reflects its true value/worth of the 2 currencies and so it wont give an accurate picture
what overcomes the problem of the inaccuracy of the comparisons of countries with different currencies and how
the PPP and this helps as it adjusts the GDP per capita figures to take into account of the differing purchasing powers of the countries. This makes it a lot easier to have a more accurate and easy comparison
what can gdp be used to compare
the living standards between countries and over time
what can gdp per capita be used to compare
the economic performances between countries and over time
what is the general trend of gdp and econ performance
the higher the countries gdp, the higher the economic performance
what is the general trend between high gdp per capita and SoL
the higher the gdp per capita, the higher the SoL
what are the limitations of using gdp and gdp per capita to compare standards and econ performance
doesn’t take into account of:
-extent of hidden economy
-public spending
-extent of income inequality
-other differences in SoL between countries
-comparisons with countries with different countries may be inaccurate
explain the limitation of the extent of hidden economy
hidden economy is any economic activity that doesn’t appear in official figures and so if this isn’t taken into account then the measures aren’t really representative or accurate
explain the limitation of public spending
some governments provide more benifits to others, such as unemployment benefits, universal benefit and free health care
explain the limitation of the extent of income inequality
the distribution of of the income between rich and poor may be very different
explain the limitation of other differences in SoL
other factors of SoL could be the number of hours worked, working conditions, different spending needs and more
