2.1.1 Flashcards
economic growth (31 cards)
how is economic growth measured
the change in national output over a period of time
what is national output
all the goods and services produced by a country
how is national output measured
the value is measured in gross domestic product (GDP)
what is GDP
GDP is the value of all goods/services produced in an economy in a one-year period within their borders
three ways of measuring national output or GDP
Expenditure method - C+I+G+(X-M)
Income method - rewards for factors of production eg wages
Output method - value of goods and services produced
what is the definition of nominal
not adjusting for inflation
what is the definition of real
taking into account inflation (adjusting for it)
what is the definition of per capita
per person - divide by population
what is gross national product (GNP)
includes the value of all goods and services produced by nationals - whether in the country or not
what is Gross National Income (GNI)
GDP + net property income from abroad. this net income from abroad includes dividends, interest and profit
what is Net National Profit (NNP)
the total value of finished goods and services produced by a country’s citizens overseas and domestically, minus depreciation (how much the physical capital has worn out)
what is Green GDP (GGDP)
GDP - environmental cost
what is purchasing power parities (PPP)
it calculates the relative purchasing power of different countries
it shows the number of units of a country’s currency that are required to buy a product in the local economy, as $1 would buy if the same product in the USA
what is the aim of PPP
The aim of PPP is to help make a more accurate standard of living comparison between
countries where goods/services cost different amounts
limitations of GDP
- lack of information provided on inequality
- quality of goods/services
- does not include unpaid/ volunteering work
- differences in hours work
- environmental factors
definition of recession
2 successive falls in quarterly growth
characterised by - falls in real GDP, low inflation, high unemployment
definition of boom
if GDP rises rapidly
characterised by - high GDP growth, low unemployment, rising inflation
how is HDI (human development index) measured
33% long and healthy life - life expectancy at birth (life expectancy index)
33% knowledge - expected years of schooling, mean years of schooling (education index)
33% a decent standard of living - GNI per capita (PPP $) (GNI index)
how is economic growth calculated
changes in real GDP / original real GDP x100
how is index numbers calculated
GDP of year / GDP of base year x 100
what does the HDI number mean
the closest to 1 the better
<0.550 is considered low development
0.550-0.699 is considered medium development
0.700-0.799 is considered high development
>0.800 is considered very high development
advantages of HDI
- more useful comparison metric than single indicators
- incorporates three of the most important metrics for households - (heath, education, income)
- widely providing an opportunity for meaningful comparisons
- governments use when developing their policies - (may identify that the education levels are holding back improvements to the HDI )
- provides citizens with an understanding of how life compares to other countries
disadvantages of HDI
- does not measure the inequality that exists as it uses the mean GNI per capita
- does not measure or compare the levels of absolute or relative poverty that exists
- does not provide useful short-term information
- data often lags for a couple of years
what is the issue of measuring happiness
happiness is a subjective measurement
