Unit 1 - Intro to Macroeconomics Flashcards
What does GDP add together
- Personal consumption
- Government expenditures
- Net exports
- Net capital formation
What is a recession?
When Real GDP shrinks for 2 or more consecutive quarters.
What is the purpose of the World Bank?
The World Bank was established to provide investment funds for infrastructure reconstruction and development in war-torn areas and less developed nations.
What are the two methods used to convert GDP value to U.S. dollars?
- Market Exchange rates.
- Purchasing-power-parity (PPP) Exchange rates.
True or false: The Gross National Happiness (GNH) an actual index.
False.
What is GDP measured in?
GDP is measured in the currency of the country in question.
What is the Subjective Well-Being (SWB) index?
The Subjective Well-Being index measures quality of life “satisfaction” by surveying people’s moods and emotions.
It is based on the judgements of survey respondents. Hence the name “Subjective Well-being”.
What is Genuine Savings (GS)?
Genuine Savings (GS) is defined as “the true level of saving in a country after depreciation of produced capital…”
True or false: The Ecological Footprint does not use GDP
True.
Why is GDP considered inadequate
It only measures monetary transactions
What is the relationship between GDP and GPI?
GDP measures current income.
GPI measures sustainability of the GDP.
What is Engel’s law?
Engel’s law is an observation in economics stating that as income rises, the proportion of income spent on food falls, even if actual expenditure on food rises.
How are GDPs of two countries compared?
GDPs of two countries are compared by converting GDP to U.S. Dollars.
What 3 things does GPI measure?
GPI compares 3 measurements
- Economic growth (GDP)
- Current environmental issues
- Sustainable use of natural resources
What is Gross National Product (GNP)?
GNP counts all the output of a nation’s residents.
Example: If a German-owned company has a factory in the United States, the output of this factory would be included in U.S. GDP, but also in German GNP.
What is Gross Domestic Product (GDP)?
GDP measures the monetary value of final goods and services —that is, those that are bought by the final user— produced in a country in a given period of time
What 4 things does the human development index measure?
- Life expectancy
- Adult literacy
- Mean years of schooling
- Real GDP per capita
Why is it difficult (or impossible) to create a single unambiguous progress metric?
- Because there are many conflicting progress concepts
and
- Because the data to support (even monetary) metrics is incomplete or unavailable.
What economic activities are excluded from GDP measurment?
- Volunteer work
- (costs of) crime
- (costs of) depletion of natural resources
- (costs of) prison population
What is Green GDP?
Green GDPs are GDP indexes that include estimates for environmental degradation and depletion of natural resources.
Genuine savings measures
True level of savings after depreciation of producers
Capital + Investments in human capital - (Depletion of Minerals, Energy, Forests and air pollution) = Genuine Savings
What is Ecological Footprint?
The Ecological Footprint (EF) assesses whether an individual, city, or nation is using available ecological assets faster than the supporting ecosystems can regenerate those assets.
What does GDP ignore
Changes in
- natural capital
- social/community capital (the human components)
What is Real GDP?
Real GDP is Gross Domestic Product adjusted for inflation to allow comparisons between GDP of different periods.
What is the Human Development Index?
Human Development Index (HDI) is an annual Human Development Report that shows how well economic growth and human development is improving human well-being in the nations of the world.
What is an ecological footprint?
A comparison of asset usage and its supporting ecosystem.
What is GDP not capable of measuring?
GDP does not measure
- overall standard of living in a country
- environmental damage
- noise
- depletion of non-renewable resources
- leisure time
- quality of life
Name some Economic and Human indexes
- GDP - Gross Domestic Product
- ISEW - Index of sustainable economic welfare
- GPI - Genuine Progress Indicator
- Genuine Wealth Indicator
- Green GDP
- GNH - Gross National Happiness
What does the Living Plant Index measure?
The extent and severity of biodiversity loss.
Specifically:
- Worlds forests
- Freshwater
- Marine ecosystems
What is Gross National Happiness?
Gross National Happiness (GNH) is a principle for guiding Bhutanese development consistent with the country’s cultural values.
What limitations do indexes have
Lack of consensus on
- selecting non-monetary measurements
- quantifying measurements (with the exception of money… but even that does not have 100% consensus)
What can happen if wealth is not distributed equally
It can lead to increased crime, reduced worker productivity, and reduced investment
What are some “Quality of Life” measures?
The Human Development Index ranks countries on
- life expectancy
- literacy and school enrollment.
The Genuine Progress indicator measures…
The Gross National Happiness indicator…
how do Market Exchange and PPP Exchange rates compare in advanced countries?
The ration of Market exchange rate to PPP exchange rate in advanced countries is usually close to 1:1
What “non-market” activities are included in GDP measurement?
- Defense spending
- Emergency housing spending
- Education spending
- Healthcare spending
What does the Happy Plant Index account include
- Life expectancy
- Life satisfaction
- Ecological foot print
Past measures prepared by official authorities are generally confined to what measurements?
- Population
- Foreign trade
- Government revenues and expenditures
- National debt
What organization was Genuine Savings (GS) build for?
The World Bank.
What “progress” topics are usually compared when debating human progress?
- Material progress
- Political progress
- Cultural progress
- Intellectual progress
- Population growth
What information do GPI and ISEW share
- personal consumption data
- crime
- environmental degradation
- loss of leisure
- infrastructure
- human services (like volunteering and housework)
Name as many quality of life indicators as you can
- Educatio
- Economy
- Energy
- Environment
- Health
- Human rights
- Income
- Infrastructure
- National security
- Public safety
- Recreation
- Shelter
Where can the international standard for measuring GDP be found?
The System of National Accounts (1993).
It was compiled by the IMF, EC, OECD, UN and World Bank.
According to Engelman what are the 3 distinct courses of “the standard of living debate”?
- The politics of the British class struggle
- Comparisons of 20th century British growth with 20th century communist economic growth
- Emerging attitudes toward society and culture
How do Market Exchange and PPP Exchange rates compare in developing countries?
The ratio of Market exchange rate to PPP exchange rate in developing countries is between 2:1 and 4:1.
What is the generally accepted measure for standard of living?
Average real gross domestic product (GDP) per capita
Green GDP includes adjustments for…
Natural resources and environmental degradation
What does ‘growth is good’ mentality promote?
Lack of political leadership and vested interest In Maintaining status quo
What does Genuine Savings (GS) measure?
GS measures the built, natural, and intangible capital that is required for human society to exist and to thrive.
What is Net Domestic Product (NDP)?
NDP = GDP - Total Depreciation.
NDP is the GDP subtract all depreciation (the wear and tear on machinery, buildings, etc)
What is the purpose of the Genuine Progress Indicator?
The Genuine Progress Indicator (GPI) is designed to measure the sustainability of GDP, essentially measuring whether progress is a result of living off the interest of community capital or spending it down.
What other ways can we measure beyond GDP and GNP
- Indexes that measuring aspects of well being.
- Composite indexes that combined both approaches
What are the 3 different ways GDP can be viewed?
- The Production Approach = Total Sales - value of inputs
- The Expenditure Approach = Total purchases made by end users
- The Income Approach = Sales - costs
What are the 2 main reasons the International Monetary Fund (IMF) was created?
The IMF was created as a forum for collaborative management of international monetary exchange and for stabilization of the exchange rates of countries’ currencies.
True of False:
The Subjective Well-Being index uses GDP in it’s measures.
False
