Topic 4-economic Growth

Question 0

Economic growth

Answer 0

Is a measure of a change in the level of Real gdp.

Question 1

What are the BRIC’s

Answer 1

Brazil,Russia, India and China

• fastest economies in the world
• China growing the fastest

Question 2

National income

Answer 2

Amount they earn

Question 3

Real GDP

Answer 3

Amount of products produced in a country

Question 4

Recession

Answer 4

When GDP falls for two quarters (over 6 month period). If this happens then it is difficult to dismiss it as s one off event

Question 5

Depression

Answer 5

A situation where the level of activity and employment not only falls sharply but also subsequently falls to recover, remaining at low levels for a long time

Question 6

GDP

Answer 6

The total market value of final goods and services produced in a given timer period within a countries border

Question 7

Formula for GDP

Answer 7

C+I+G+X+M=GDP

C= consumers
i= investment
G=government 
X= exports
M= imports

Question 8

Why economic growth is a bad measure for changes in living standards

Answer 8

• doesn’t take into account changed in the population
• black market/hidden economy (difficult to compare countries because may have a large hidden economy) e.g to avoid tax transactions may go unrecorded and excluded from official statistics
• ignores distribution of income(inequalities of income and wealth)
• real versus nominal(international price differences are not taken into account when using nominal GDP) to solve this problem GDP statistics have to be re-calculated in terms of purchasing power and purchasing power parity
• currency conversion (GDP figures for different countries must be converted to common currency>may give misleading figures e.g converting to US dollars may not be accurate for countries who international trade is small

Question 9

Advantages of using GDP

Answer 9

• best method we have
• it’s a figure so it is easy to compare living standards between countries as it is a quantifiable measure
• available for almost every country in the world that

Question 10

Nominal GDP

Answer 10

Monetary value of all the output produced in an economy during a given time period

Question 11

Why doesn’t nominal GDP measure economic growth accurately

Answer 11

Because nominal GDP rises if prices and or output rises. A rise in prices is not economic growth. Economic growth occurs when the economy’s output increases

Question 12

Real GDP

Answer 12

Is adjusted for inflation. A base year is taken and prices are adjusted to that base year .

• real GDP measures the quantity of output that an economy produces during given time period
• economic growth occurs if real GDP increases because this means the quantity of an economies output rises>more is being produced

Question 13

Potential economic growth

Answer 13

• Is a measure of the increase in capacity in an economy.
• It can be shown by an outwards shift of the ppl curve
• measure of how efficiently the economy is using its resources

Question 14

Double dip recession

Answer 14

When an economy comes out of recession but quickly returns to 2 consecutive quarters of negative economic growth

Question 15

GDP per capita

Answer 15

Total GDP divided by the population

Question 16

Purchasing power

Purchasing power parity

Answer 16

Purchasing power of a currency refers to the quantity of the currency needed to purchase a given unit of a good or common goods and services determined by the relative cost of living and inflation

Purchasing power parity means equalising the purchasing power of two currencies by taking into account cost of living differences