Test 1 Flashcards
What’s GDP per capita?
GDP per capita measures the average economic output per person in a country.
What’s the formula for GDP per capita?
Total GDP / Population
What are the pros of GDP per capita?
Can measure the average standard of living in an economy.
Allows for comparisons of economics performance between countries with different populations.
What’s GDP?
The monetary value of all goods and services produced in an economy in a year. It counts the value of output produced within the geographical boundaries of a country.
What’s expenditure?
Aggregate demand
What are factor incomes?
Incomes from wages and salaries
Profits of private and public sector businesses
Rental income from ownership of land
What’s the value of output?
Value added from each of the main sectors.
What’s GNI?
An alternative to GDP as a measure of wealth. It measures income instead of output.
What’s the formula for GNI?
GDP + Net Primary Income + Net Secondary Income
What’s Net Primary Income?
All income earned abroad and earnings from foreign investments.
What’s Net Secondary Income?
Transfers of money between countries.
What’s the bassline measure of living standards?
RNI per capita
What’s a purchasing power parity?
Measures how many units of one country’s currency are needed to buy exactly the same basket of goods and services as another currency.
What’s disposable income?
The amount of money households have available for spending and saving after direct taxes.
What are the cons of income per capita?
Ignores the distribution of income
Official data on incomes can be inaccurate
Rural vs Urban variations in per capita income
Changes in length of working hours, job conditions and security
What are the cons of GDP?
Shadow Economy
Double counting
Public sector
Unreliable Statistics
What’s economic well-being?
Refers to the overall quality of life and material prosperity enjoyed by households and individuals.
What’s subjective hapiness?
Refers to self-reported levels of happiness with one’s life.
How does the HDI measure economic development?
Life expectancy at birth
Years of schooling
Real GNI per capita
Purchasing Power Parity
What are the pros of HDI?
Accounts for well-being
Uses fairly reliable data for comparison
Accounts for health and education
Can identify successful government policies
What are the cons of HDI?
Doesn’t account for many qualitative factors like political freedom.
Doesn’t account for income inequality.
Doesn’t look at poverty or deprivation
May be outdated
What’s the Easterlin Paradox?
The Easterlin Paradox refers to the belief that life satisfaction rises with incomes until a certain point, where there’s diminishing returns of happiness.
What are the evaluations of the Easterlin Paradox?
There’s a definite connection between GDP and happiness
Rich countries have higher levels of social cohesion, social trust and more stable political systems, which lead to happiness.
