Seminar 1

Question 1

GDP-

Answer 1

The value of output produced within a country over a 12 month period

Question 2

3 Methods to Calculate GDP

Answer 2

Income Method
Expenditure Method
Product Method

Question 3

Income Method

Answer 3

Add all incomes

-wages, salaries, profits

Question 4

Expenditure Method

Answer 4

Simple model of circular flow of income, whatever’s produced is sold, so must be value of what’s produced

Question 5

Product Method

Answer 5

Add value of all goods and services for all industries

Question 6

National Product =

Answer 6

National Income

National Expenditure

Question 7

Nominal GDP

Answer 7

Measured at current prices

-Doesn’t account for inflation

Question 8

Real GDP

Answer 8

Allows for inflation

-Uses a base year to eliminate inflation impact

Question 9

Use of GDP per Capita

Answer 9

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

Question 10

Purchasing Power Parity (PPP) Exchange Rate

Answer 10

Exchange rate corrected to take into account purchasing power of a country

Question 11

Purchasing Power Standard (PPS) GDP

Answer 11

GDP measured at a country’s PPP exchange rate

Question 12

Using Real per Capita PPS GDP gives a good indication of…

Answer 12

Production levels and generated incomes

Question 13

Two main unrecorded areas to do with GDP

Answer 13

Non-Marketed Items

Informal Sector

Question 14

Non-Marketed Items

Answer 14

D.I.Y., causes production understatement

• Doing your own childcare
• Doing your own decorating

Question 15

Informal Sector

Answer 15

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

Question 16

Why’s GDP a poor indicator of Society’s Well-Being?

Answer 16

Production ≠ Consumption
Human Costs
Ignores externalities i.e. Env. Impacts
Increased crime increases GDP as more spent on security
Ignores income distribution

Question 17

Genuine Progress Indicator (GPI)

Answer 17

Measures economic growth, looking at social and environmental impacts too
Takes into account negative impacts on the economy

Question 18

Genuine Savings (GS)

Answer 18

Measure of wealth, includes human, natural and economic

Rates of GS used to measure sustainability (needs to be 0 or increasing)

Question 19

Gross National Happiness

Answer 19

Uses 9 domains to look at how content people are

From Bhutan King, 1972

Question 20

Human Development Index

Answer 20

Socio-economic development

4 principle areas

Question 21

4 Principle Areas of HDI

Answer 21

Mean years of schooling
Expected years of schooling
Life expectancy at birth
GNI per capita

Question 22

Happy Planet Index

Answer 22

Measures how effectively a country converts resources into human wellbeing
(Sum of well-being and life expectancy, divided by ecological footprint)