2.1.1 - Economic growth

Question 1

What is economic growth?

Answer 1

An increase in the real value of goods and services produced in a country or area as measured by the annual percentage change in real national output. Also a long-run increase in a country’s productive capacity.

Question 2

What is gross domestic product (GDP) ?

Answer 2

GDP is the national income. A baseline measure of living standards.

Or

“The value of goods and services produced in the economy over a period of time”

Question 3

What does nominal (GDP) mean?

Answer 3

Monetary value of all goods and services produced, expressed at current prices.

Question 4

What is real income?

Answer 4

Nominal income adjusted for price changes, expressed at constant prices.

Question 5

What is per capita income?

Answer 5

This is the total income divided by the number of people in the country

Question 6

What is short-run economic growth?

Answer 6

The actual annual percentage change in real national output

Question 7

What is long-run economic growth?

Answer 7

An increase in potential productive capacity of the economy.

Question 8

What is real GDP?

Answer 8

The value of goods and services produced in the economy over a period of time taking into account inflation>

Question 9

What is total national income?

Answer 9

This is the value of all the goods and services produced in the country

Question 10

What does volume look at?

Answer 10

Volume looks at the quantity of goods and services produced in the country

Question 11

What does value look at?

Answer 11

Value looks at the monetary worth of the goods and services in a country

Question 12

What is purchasing power parties?

Answer 12

This a method that allows us to look at the relative value of different currencies. It takes GDP then divides it with the number of people in the economy. It then converts the income into dollars then compares it to other currencies across the world. This allows us to see how much an individual from each country can purchase given the average amount of income that they have.

Question 13

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

Name 2

Answer 13

• Accuracy of statistics - constantly changing population
• Transactions without a monetary value eg housework
• The shadow economy isn’t taken into value
• The negative externalities such as pollution that economic growth can cause are not taken into account
• Economic growth can cause inequalities in income and wealth within a country

Question 14

Name 3 things that have an impact on happiness

Answer 14

• Real GDP per capita
• Healthy life expectancy
• Having someone to count on
• Perceived freedom to make life choices
• Freedom from corruption
• Generosity
• Family relationships
• Financial situation
• Health
• Persoanl values

Question 15

What’s your case study for national happiness

Answer 15

Nordic countries - Finland , Sweden , Denmark

Question 16

What is economic growth measured by?

Answer 16

• The retail price index
• The real national income
• The output of the manufacturing industry
• Consumer expenditure

Question 17

What graphs can be used for economic growth

Answer 17

SRAS/LRAS and demand graphs

Question 18

How do you calculate real national output? (RNO)

Answer 18

Nominal national output
————————————
average price level

Question 19

What is gross national product?

Answer 19

The GNP of a country is the value of all goods and services produced by domestic business both at home and abroad so this includes overseas assets.

Question 20

What is the gross national income (GNI) of a country?

Answer 20

The gross national income of a country is its total level of income.

Question 21

Name 2 problems with comparison between developed and developing countries.

Answer 21

• Accuracy of statistics can vary dramatically between developed and developing countries
• Developing countries often consume what they have and don’t offer those things on the market. Therefore. they have no monetary value
• Developed countries often increase incomes at the expense of QOL. Fore example, stress, long working hours and congestion when travelling
• Developing countries might wish to achieve growth at the expense of health and safety
• Alternative methods of measuring the QOL are available

Question 22

Name 2 benefits of economic growth

Answer 22

• Increased profitability for firms
• Job creation
• Increase of living standards
• Rising consumer income
• Higher confidence for firms and consumers
• Lower government spending on JSA