Revisin Guide Stuff Flashcards
What is potential economic growth?
An increase in the productive capacity of a country.
What is actual economic growth?
A rise in real incomes or GDP.
What two things must be applied when using National Income values to show standard of living?
Per capita
Gross (or real)
Define GDP?
The sum of all goods and services produced in a country in a year.
Problems of comparison of economics growth between countries? (6)
Subsistence, barter + black economy Currency values Income distribution Size of the public sector Consumer and capital spending Quality issues
What is subsistence?
Supporting oneself (eg farmers eating own produce)
What is barter?
If goods are traded without the price system.
What is the black economy (hidden economy)?
Goods that are sold without being declared for tax purposes.
Why do currency values cause problems for comparing GDPs?
Because it is often unclear whether to use the official value of that currency or the purchasing power of it?
Why does the size of the public sector cause problems for comparing GDPs?
A lot of spending can be done by the public sector (government) but it may not necessarily improve welfare for the population.
Why do consumer and capital spending cause problems for comparing GDPs?
Spending on investment goods may mean SofL increases in the future, but at the expense of SofL now. It is often better to look at future economic growth patterns rather than just considering current income.
Why do quality issues cause problems for comparing GDPs?
There may be lots of spending on eduction, but how can we tell how good quality it actually is - are good results enough to prove SofL is actually rising?
6 issues of using CPU for inflation measure?
Doesn’t include housing costs
Info may be inaccurate
Fashions change more than once a year, but 650 items change once a year
Basket ignores deals
Atypical spending patterns causes inflation to affect some people diff.
Doesn’t take into account change in quality of goods
Disadvantage of inflation (find more!)?
High inflation makes countries less competitive.
