Aggregate Incomes (Scaling and calculating GDP)

Question 1

State the two forms of inequality

Answer 1

Within countries and between countries

Question 2

Define Inequalities Within countries

Answer 2

Someone who is poor or rich relative to others in the same countries

Question 3

Define Inequalities between countries

Answer 3

Someone who is living in a rich country compared to someone living in a poor one

Question 3

State different ways to scale and compare GDP between countries

Answer 3

GDP per Capita
GDP per worker
GDP per hours worked

Question 4

Describe what market rates are

Answer 4

Used to compare two different countries in the same currency
Currency/ exchange rate = other currency

Question 5

Define Purchase Power Parity

Answer 5

Much more accurate way of comparing living standards
Compares how much it costs to buy a fixed basket of consumer goods

Question 6

Describe how to produce output/GDP

Answer 6

Capital
Labor: H= L* h, total number of workers *average human capital of efficiency
Technology - Total factor productivity

Question 7

Define Constant returns to scale in capital and labor

Answer 7

Doubling both capital and labor then output doubles

Question 8

Define Diminishing returns to scale in capital

Answer 8

Each unit of capital adds less to output than the last

Question 9

Define Diminishing returns to scale in labor

Answer 9

Each unit of labor adds less to output than the last

Question 10

Define the Aggregate Production Function

Answer 10

GDP = Technology * (Capital * Labor)