Theme 2.1 Measures Of Economy

Question 1

What are the 4 measures of economic growth?

Answer 1

GDP
Inflation
unemployment
balance of payments

Question 2

What is GDP?

Answer 2

GDP is the total value of goods and services in an economy over a period of time

Question 3

What is economic growth?

Answer 3

Economic growth is the % change in GDP yearly.

Question 4

What is inflation and why does it happen?

Answer 4

• Inflation is the general increase in price.

- It is caused by too much money in the economy.

Question 5

What is a recession?

Answer 5

A recession is negative growth in the economy for two consecutive quarters.

Question 6

What is nominal economic growth?

Answer 6

Nominal growth is the % change in GDP over time (not adjusted for inflation)

Question 7

What is real economic growth?

Answer 7

Real economic growth is the % change in GDP - % rate of inflation.

Question 8

What is the economic cycle and what are the phases?

Answer 8

The phases that an economy goes through.
Recession- (negative growth)
Slump- ( the trough in the cycle)
Recovery- (positive growth)
boom -(the peak of the economy)

Question 9

What happens in a recession?

Answer 9

A recession.
increase in sales,
more budget businesses,
more purchases in charity shops.

Question 10

What happens in a slump?

Answer 10

• homlesslessness
• strikes
• demand for job centre plus

Question 11

How to measure GDP per capita?

why is it limited?

Answer 11

GDP divided by population

GDP/population

Because it does not take into account inequalities of wealth.

Question 12

How can GDP increase?

Answer 12

GDP can increase by
VOLUME - Higher quantity of goods and services produced

VALUE - The nature of the goods are more expensive.

Question 13

What is the difference between GDP and GNI?

How do you workout GNI

Answer 13

GDP is the value of all goods and services produced within a country’s borders.

GNI- measures the income received both domestically (GDP) and from overseas.

GNI= GDP + net income flow from abroad.

Question 14

What are the advantages of GDP and GNI (3 reasons)

Answer 14

1- They are widely understood and used globally

2- They use the same methodology to collect data

3- Widely understood.

Question 15

What are the Disadvantages of GDP and GNI (3 reasons)

Answer 15

1- They do not take into account the informal economy
(goods and services that are not declared)

2- Increased GDP or GNI does not always mean better living standards as there can be an inequality of wealth

3- New innovations could decrease cost which would decrease GDP

Question 16

What is nominal GDP and real GDP?

Answer 16

Nominal GDP is GDP not adjusted for inflation.

Real GDP is adjusted for inflation.

Question 17

What is GDP per capita?

Answer 17

GDP per capita is total value of all goods and services divided by the population. Per capita also means “per head” so it is a good measure when comparing.

Question 18

What is total GDP?

Answer 18

The combined total monetary value of all goods and services produced within a country’s borders in a given time period.

Question 19

What are the limitations of using GDP to compare living standards?

Answer 19

GDP does not show the distribution of wealth. This is because two countries may have very similar GDPs but the standards of living may be different due to the distribution of wealth.

GDP may need to be recalculated in terms for purchasing power parities to make International comparisons. The apps are based on the cost of living and the inflation rate.

GDP does not take into account the informal economy
(cash in hand).

GDP only indicates standard of living and not welfare like Hapiness index

Question 20

What is volume GDP

Answer 20

GDP adjusted for inflation. The size of the basket of goods and real level of GDP.

Question 21

What is value GDP

Answer 21

is the monetary value of GDP at prices of the day. It is the nominal figure and can be calculated by volume times current price level.