The measurement of macroeconomic performance Flashcards
national output
all goods and services produced in an economy
GDP
Gross domestic product-national output measured by value of good and services
Rate of economic growth
is the speed at which national output grows over time
Rate of Economic growth equation
change in GDP/ original GDP * 100
Nominal GDP
GDP figure not adjusted for inflation
Real GDP
removing the effect of inflation for example if GDP rose by 4% and inflation by 3%, GDP is 1
GDP per capita formula
help measure standard of living to get output per person
Total GDP/ population size= GDP per capita
GNI
gross national income=GDP + net income
Net income
an income earned by a country on investment- income earned by foreigners domestically
GNP
gross national product- total output of citizens in that country
PPP
purchasing power parity- is the real value of an amount of money in terms of what you buy with it
Importance of PPP
it can help with comparisons between countries living standards by adjusting GDP per capita by taking into account differences in purchasing power
disadvantages of using GDP and GDP per capita figures
it doesnt take into account
public spending on benefits which improves standard of living
extent of income inequality
other differences like working conditions and working hours
Advantages of using GDP and GDP per capita figures
High GDP shows economic performance is strong
High GDP per capita shows standard of living is high
Index numbers
useful in making comparisons over a period of time
first is base year of 100 with changes shown with numbers below or above 100
