Topic 4 - More About Economic Growth Macro

Question 1

Difference between real and nominal GDP

Answer 1

Real GDP tracks the total value of goods and services calculating the quantites but using constant prices that are adjusted for inflation. Nominal does not account for inflation.

Simplified version: Real GDP account for inflation whereas Nominal GDP does not account for inflation.

Question 2

Difference between GDP and GNI

Answer 2

GDP- Total market value of all finished goods and services within a country
GNI- Total income recieved by country from its residents and businesses regardless of whether they are located in the country or abroad. (Within and outside the country)

Question 3

How to calculate GDP per capita

Answer 3

Countrys gross domestic product divided by its population

Question 4

What is PPP

Answer 4

Purchasing Power Parity- Purchasing power parity (PPP) is an economic theory of exchange rate determination. It states that the price levels between two countries should be equal. This means that goods in each country will cost the same once the currencies have been exchanged.

Question 5

Why is it needed to make comparisons about standard of living between countries

Answer 5

It is a more meaningful measure for comparing standard of living of different countries. Economists are also able to evaluate changes in living standards without the influence of changes in population growth