Week 13 Content

Question 1

What is GDP?

Answer 1

Market value of all the final goods and services produced within a country in a given period of time

Question 2

What does an increase in GDP mean?

Answer 2

Provides an indication of expansionary growth

Question 3

What is disinflation?

Answer 3

Prices rising but at a slower rate

Question 4

Formula for inflation

Answer 4

((Current Price - (Current Price - 1))/ Current Price - 1) x 100

Question 5

What is equilibrium unemployment?

Answer 5

Level of unemployment whilst at equilibrium mark ( DL = W)

Question 6

What is a depression?

Answer 6

A prolonged and deep recession

Question 7

What is the circular flow of income?

Answer 7

Shows how resources and financial payments flow between households and firms

Question 8

Examples of Injections

Answer 8

GS, I, X - monetary additions to economy

Question 9

Examples of Leakages

Answer 9

M, S, T - withdrawals from circular flow of income

Question 10

What are the 3 different approaches to calculating GDP?

Answer 10

Production, Income & Expenditure

Question 11

What is GVA?

Answer 11

Measurement of the economic contribution from a sector or company towards the total production of goods and services. Shows influence of industries to economies

Question 12

What are intermediate inputs?

Answer 12

Refers to all the material involved in the production process of a good/or service

Question 13

What is the expenditure approach?

Answer 13

Some of all the expenditures (spending) within an economy

Question 14

Does the expenditure method include intermediate inputs

Answer 14

No

Question 15

What is the income method?

Answer 15

All income generated by economic activity, excludes transfer payments (payments where no goods and services are exchanged)

Question 16

What is GNI?

Answer 16

Represents total income of permanent resident of the UK

Question 17

Formula for GNI

Answer 17

GDP + NPI (Net Property Income)

Question 18

Formula for NNI

Answer 18

GNI - Capital Depreciation

Question 19

What is capital depreciation?

Answer 19

The rate at which the value of an existing stock declines per period as a result of usage or obsolescence

Question 20

What does NNI include?

Answer 20

Market prices

Question 21

Formula for gross investment

Answer 21

Net Investment + Replacement Investment

Question 22

Formula for NI

Answer 22

NNI (amount received) - Indirect Taxes (tax plus any subsidy unit of economic production)

Question 23

Difference between Nominal & Real

Answer 23

Real - Adjusted for inflation, Nominal - not

Question 24

Formula for GDP Deflator

Answer 24

Nominal Prices / Real Prices

Question 25

Evaluate GDP Methods (3)

Answer 25

Doesn't account unreported activities (hidden economy`), no account for production externalities (micro-synoptic content), doesn't account for distribution of income