Seminar 1 Flashcards
GDP-
The value of output produced within a country over a 12 month period
3 Methods to Calculate GDP
Income Method
Expenditure Method
Product Method
Income Method
Add all incomes
-wages, salaries, profits
Expenditure Method
Simple model of circular flow of income, whatever’s produced is sold, so must be value of what’s produced
Product Method
Add value of all goods and services for all industries
National Product =
National Income
National Expenditure
Nominal GDP
Measured at current prices
-Doesn’t account for inflation
Real GDP
Allows for inflation
-Uses a base year to eliminate inflation impact
Use of GDP per Capita
Can look at per employed head, looking at average amount a worker produces
Not skewed by population size as per head
i.e. China huge population- large GDP, but less than other countries when per capita
Purchasing Power Parity (PPP) Exchange Rate
Exchange rate corrected to take into account purchasing power of a country
Purchasing Power Standard (PPS) GDP
GDP measured at a country’s PPP exchange rate
Using Real per Capita PPS GDP gives a good indication of…
Production levels and generated incomes
Two main unrecorded areas to do with GDP
Non-Marketed Items
Informal Sector
Non-Marketed Items
D.I.Y., causes production understatement
- Doing your own childcare
- Doing your own decorating
Informal Sector
Unregulated
- Doesn’t include income under tax levels, for some countries this is up to 80% of their income
- Underground Economy, illegal, undeclared transactions i.e. drugs
Why’s GDP a poor indicator of Society’s Well-Being?
Production ≠ Consumption Human Costs Ignores externalities i.e. Env. Impacts Increased crime increases GDP as more spent on security Ignores income distribution
Genuine Progress Indicator (GPI)
Measures economic growth, looking at social and environmental impacts too
Takes into account negative impacts on the economy
Genuine Savings (GS)
Measure of wealth, includes human, natural and economic
Rates of GS used to measure sustainability (needs to be 0 or increasing)
Gross National Happiness
Uses 9 domains to look at how content people are
From Bhutan King, 1972
Human Development Index
Socio-economic development
4 principle areas
4 Principle Areas of HDI
Mean years of schooling
Expected years of schooling
Life expectancy at birth
GNI per capita
Happy Planet Index
Measures how effectively a country converts resources into human wellbeing
(Sum of well-being and life expectancy, divided by ecological footprint)
