Measuring a nation's income Flashcards
Slowdown in GDP
When growth rates are lower than in previous year
2011: slowdown in growth rates in five European countries less than 1%
Fall in GDP is negative growth when value of output is lower than in the previous years
Export led recovery
Boost of GDP comes from increased exports to foreign countries to compensate for low domestic investment activity
UK and no export led recovery
Due to servers recession in the euro zone area the markets for UK export contracted.
At the same time the UK was in an economic turmoil.
2. The severe restriction measures by the UK government has hit the consumer spending
3. Firms don’t want to invest into uncertainty so therefor they have a lot of spare cash in their B|S
Economic income = expenditure ?
Because every transaction has two parties. Buyer and seller
Every euro spend by the consumer is an euro of income of a producer
Hence economic income = expenditure
What is GDP?
Market value of a final good & service produced within a country in a given period of time
Market value : adds up different final products by using their market price
Of all : goods and services
Produced : currently produced
Within a country : produced domestically
In a given period : usually quarterly or yearly
GDP/capita : GDP/ population = national income per head
Which one has a higher GDP? Luxury or normal car
Luxury car contributes more to the GDP since the luxury car has a higher value.
Total contribution of a baker
Euro 3
GDPs components of expenditure
Y=C+I+G+NEX
C: consumption
I : private household purchases new household
G : purchase of local, state or national government
NEX : national export rate
Is GDP a reliable perk a certain indicator?
It is quite reliable but it cannot serve as an accurate indicator of well being
Leisure and volunteer work are not included in the GDP
GDP does not measure the health of countries children health or education, or cultural heritage of a country
Why are transfer payments excluded from GDP?
Because they are not used for exchange of a current produced good or service
Transfer after household income but they do not reflect the economies production
Why are used goods not included in the GDP?
GDP only measures the sale of final goods and services
If used products sold are included in the GDP an inter-year comparison of GDP would not be provided
Coma prison of well being India vs Uk
It is likely that in India more food and meals are prepared at home which is not included in the GDP
U.K. Is the exact opposite
That is why UKs GDP might be overstated and Indians GDP understated
Why did the economy increase since there is a higher participation of female workers?
GDP increased as the workforce grew. More people are engaged in production thereby positively affecting GDP
How can an increase in government spending be financed?
By increasing taxation or the mission of government bonds.
Public debt obligation and lead to increased taxation later because interest payments.
What is the Esterlin paradox?
Richard Esterlin pointed out that the results of a nations happiness poll did not correlate all that well with per capita income.
Rich people are happier than poor people in the same country. But that doesn’t automatically means that richer countries are happier than poor counties.
