4.2.1.4 Flashcards
Uses of national income data (20 cards)
What does GDP measure?
The total value of national output of goods and services produced in a given time period.
How is short-run economic growth measured?
By the annual % change in real gross domestic product.
What is long-run economic growth?
An increase in a country’s productive capacity.
What does PPP stand for?
Purchasing Power Parity
What does PPP measure?
How many units of one country’s currency are needed to purchase the same basket of goods and services in another country.
How does high cost of living affect PPP-adjusted GNI per capita?
There will be a downward adjustment in countries with high living costs e.g. Noway or Switzerland.
What is the Big Mac Index used for?
To assess how over/undervalued local currency is compared to the US$.
What is the main indicator for standard of living?
Real GNI per capita expressed at PPP
List some benefits of using real GDP.
- Easy to make comparisons
- Easy to compare different countries
- Correlates with other measures of living standards
- Higher income usually correlates with buying more goods
What are some errors in published GDP data?
- Understates real national income due to shadow economy
- Includes illegal activities like drug distribution
- Concealed activities such as tax evasion
- UK estimated hidden economy tax gap was £3.5 billion in 2015-2016
- UK includes estimates from the shadow economy since 2014
What are limitations of published data as a guide to living standards?
- Income and wealth inequality
- Changes in leisure and working hours
- Depreciation of capital machinery
- Valuation of healthy life expectancy
- Value of unpaid work
- Innovation in quality of products
- Impact of GDP growth on natural resources
- Quality of goods and services ignored
- Defensive expenditures
- Household debt not considered
- Non-monetary factors affecting living standards
What sustains economic growth over time?
Growth of real GDP
Define economic welfare.
A broader measure of well-being not directly linked to material aspects of life. It may include inequality and median household incomes.
What does economic well-being statistics include?
- Real GDP per capita
- Real household spending per head
- Median household income
- Household net worth
- Unemployment rate
- Financial situation of households
What is Bhutan’s alternative measure of progress instead of GDP?
Gross National Happiness (GNH)
What are the 4 main aspects of GNH?
- Sustainable and equitable socio-economic development
- Environmental conservation
- Preservation and promotion of national culture
- Good governance
List the 9 domains Bhutan measures for GNH.
- Psychological well-being
- Health
- Time-use
- Education
- Cultural diversity and resilience
- Good governance
- Community vitality
- Ecological diversity and resilience
- Living standards
What is median income?
The income of the middle household when all are ranked from lowest to highest.
What constitutes a household’s disposable income?
All income remaining after taking into account taxation.
What does subjective happiness refer to?
Self-reported levels of happiness with one’s life.It is typically measured through questionnaires focusing on emotions.
