THEME 2 - Topic 1 - Measures Of Economic Growth Flashcards
Define macroeconomics
The study of the interrelationships between economic variables at an aggregate level.
Name 4 macroeconomics indicators
- Economic growth
- Inflation
- Unemployment
- Balance of payments
Name 3 sources of economic data
- Office for National Statistics (ONS)
- World Bank
- United Nations
Define nominal value
The value of an economic variable based on current prices taking no account of changing prices through time. and is expressed through money prices, including the distorting effects of inflation.
Define real value
The value of an economic variable taking account of changing prices through time, removing the distortion of inflation and is based on constant prices.
What is the formula for real gdp?
Real GDP = Nominal GDP x P index base
———————
P index current
Define an index number
A device for comparing the value of a variable in one period or location with a base observation.
What is the formula for an index number?
Index number = current value
——————— x100
base value
Define GDP
A measure of the economic activity carried out in the domestic economy over a period of time and is the value of all the goods and services produced by the factors of production based within a country in a particular year.
Define GNI
A measure of all the goods and services produced by a country’s owned factors of production wherever they are located- it is GDP plus net income from abroad.
Define potential economic growth
An expansion in the productive capacity of the economy, and when there is an improvement in the quality and/or the quality of the factors of production, and is represented by a shift to the right of the PPF.
Define actual economic growth
The rate of growth of real GDP in a period (usually 1 year).
Name the 3 ways of calculating GDP
Income
Expenditure
Output
What does the income method of calculating GDP refer to?
The income paid to the factors of production.
= wage + rent + investment + profit
What does the output method of calculating GDP refer to?
The value of output produced by various industries.
What does the expenditure method of calculating GDP refer to?
The total expenditure broken down into:
Consumption
Investment
Government spending
Net exports
What is the formula for calculating GNI?
GNI = GDP + net income from abroad
Define GNI per capita
Average level of GNI per head of the population.
Define purchasing power parity rate (PPP)
Allows a traveller between the countries in question to convert between the relevant currencies and be able to purchase the same quantity of goods/services regardless of the country they are in.
Name 4 limitations of using GNI per capita for measuring the standard of living
- Inequality in income distribution
- Informal sectors
- Exchange rate problems
- Is it an appropriate social indicator?
Name 4 other social indicators
- Human development index (HDI)
- Measures of economic welfare (MEW)
- Index of sustainable economic welfare (ISEW)
- Gross national happiness (GNH)
What must the income method remove when calculating GNI?
Transfer payments (e.g unemployment benefits).
