Theme 2.1 - Measures of economic performance

Question 1

2.1.1 - What is economic growth?

Answer 1

• The rate of change of output

- Typically measured by the % change in real GDP per year

Question 2

2.1.1 - What is GDP or Gross Domestic Product?

Answer 2

• the standard measure of output which allows us to compare countries
• the total value of goods and services produced in a country within a year
• indicator of the standard of living in a country

Question 3

2.1.1 - What are the different forms of GDP?

Answer 3

• Total GDP represents the overall GDP for the country
• GDP per capita is the total GDP divided by the number of people in a country
• Real GDP strips out the effects of inflation whilst Nominal GDP does not

Question 4

2.1.1 - What is Purchasing Power Parities?

Answer 4

• An exchange rate of one currency for another which compares how much a typical basket of goods in the country costs compared to one in another country
• useful - takes into account cost of living

Question 5

2.1.1 - What are real values?

Answer 5

• can be described as the volume of national income whilst nominal values represent the value of the national income

Question 6

2.1.1 - What are other national income measures?

Answer 6

• Gross National Income (GNI) - the value of goods and services produced by a country over a period of time plus net overseas interest payments and dividends
• Gross National Product (GNP) - the value of goods and services over a period of time through labour or property supplied by citizens of a country both domestically and overseas

Question 7

2.1.1 - What are some problems of using GDP to compare standards of living?

Answer 7

• Inaccuracy of data
• Inequalities
• Quality of goods and services
• Comparing different currencies
• Spending

Question 8

2.1.1 - What is important to consider when comparing growth on countries?

Answer 8

• over time - changing national income levels - important to use real, per capita figures
• between countries - GDP per capita needed as difference in total GDP do not necessarily mean a difference in living standards

Question 9

2.1.1 - What is national happiness made up off?

Answer 9

Six key factors

• Real GDP per capita
• Health
• Life expectancy
• Having someone to count on
• Perceived freedom to make life choices
• Freedom from corruption and generosity

Question 10

2.1.1 - When did national happiness start to be looked at in the UK?

Answer 10

• 2010 the Measuring National Wellbeing report was launched

- 4 key questions about life satisfaction, anxiety, happiness and worthwhileness

Question 11

2.1.1 - What is the relationship between real incomes and subjective happiness?

Answer 11

• Happiness and income are positively related at low income
• Higher levels of income aren’t associated with increases in happiness
• Income and happiness depends on the people around us
• Income is linked to social status (ss) and higher ss tends to make us happier