Measuring Economic Activity Flashcards
Define GDP (Gross Domestic Product).
The total value of all final goods and services produced within a country in one year.
What are the three approaches to calculating national income?
Expenditure approach, income approach, and output approach.
What is the expenditure formula for GDP?
GDP = C + I + G + (X - M)
What does the income approach include?
Wages (W), rent (R), interest (I), and profit (P) → National Income = W + R + I + P
What is GNI (Gross National Income)?
GDP + net income from abroad.
Difference between nominal and real GDP?
Nominal GDP isn’t adjusted for inflation; real GDP is.
How is real GDP calculated?
Real GDP = (Nominal GDP / GDP Deflator) × 100
What is GDP per capita?
Real GDP divided by the population — shows average income per person.
What is Purchasing Power Parity (PPP)?
How many goods and services the GDP will actually get you.
What are the 4 phases of the business cycle?
Boom, slowdown, recession, recovery.
Limitations of GDP as a well-being measure?
Doesn’t account for income distribution, quality of goods, unpaid work, environmental impact.
What does the OECD Better Life Index measure?
Well-being across 11 dimensions like income, jobs, health, education, and safety.
What is the Happy Planet Index (HPI)?
A measure of sustainable well-being using life expectancy, well-being, and ecological footprint.
What does the Happiness Index measure?
Happiness in 10 life areas including health, work, governance, and community.
