Economic Growth Flashcards
(27 cards)
GDP
The total monetary value of national output of goods & services produced in an economy in a given time period.
How can you calculate GDP?
By adding up all expenditure on goods and services using AD equation (C + I + G + [X - M] )
What is manufacturing?
The production of tangible goods. E.g. new vehicles or smartphones.
What is Nominal GDP?
The total monetary value of a national output of goods and services produced in an economy in a given time period, measured at current prices.
What is Real GDP?
The total monetary value of national output of goods and services produced in an economy in a given time period, adjusted for inflation.
What is Real GDP Per Capita?
Real GDP divided by population
What is the benefit of using index numbers?
- Easy to understand
- Easy to make comaparisons
What is Gross National Income (GNI)?
The total monetary value of all income earned by a country, calculated by GDP + Net property Income from abroad
Purchasing Power Parity(PPP)
How many units of one country’s currency are needed to buy the same basket of goods in another currency.
Human Development Index (HDI)
A measure of standard of living and economic development.
What is included in HDI?
- Health - life expectancy at birth
- Education - Mean years of schooling & expected years of schooling.
- Living standards - GNI per capita
What are the advantages of using HDI?
- Easy to compare over time
- Combines economic and social factors
- Global measure
What are disadvantages of using HDI?
- Doesn’t account for inequalities within a country
- Easily influenced by short term fluctuations (doesn’t portray long term accurately)
- Only considered 3 dimensions
What are the limitations of published data as a guide to living standards?
- Doesn’t show regional inequalities of income & wealth
- Doesn’t show changes in leisure & working hours
- No allowance for the depreciation of capital machinery
- Doesn’t show changes in years of people’s healthy life expectancy at birth.
- Doesn’t show value of non-marketed output (e.g. DIY)
Economic Welfare
The level of standard of living in a nation or area.
Economic Growth
An increase in the productive capacity and real national output of the economy.
What causes short run economic growth?
Increase in AD/R. GDP
Increase in AD/R. GDP
Increase in LRAS/Productive capacity
Output Gap
The difference between the actual level of GDP and its estimated potential level.
positive output gap
Where actual GDP is above potential GDP.
negative output gap
When actual GDP is less than potential GDP, resulitng in the economy having a large margin of spare capacity of factor resources.
Recession
2 consecutive quarters (6 months) of negative economic growth.
What is the difference between value & volume of GDP?
- Value = the monetary worth of GDP
- Volume = the physical number of output produced
potential growth
An increase in the maximum potential output of the economy.
