Economics mini test Flashcards
(7 cards)
What are the 4 macroeconomic objectives?
- Sustainable economic growth
- Low inflation
- Low unemployment
- A stable balance of payments
What is the differences between Real GDP and Nominal GDP?
- Real GDP = A measure of the total value of national output of goods and services produced in a given time period which considers inflation, it is adjusted for changes in prices
-Nominal GDP = It measures the total value of all goods and services produced within a country’s borders at current prices during a specific time period, but it doesn’t account for the changes in prices that may occur during that time
Why do countries use GDP to compare over time?
Because it allows them to track economic growth or decline. It provides a standardized way to assess changes in economic output, living standards, and productivity across different time periods
What is the definition of Purchasing Power Parities (PPP)?
PPP is the idea that items should cost the same in different countries, based on the exchange rate at the time. PPP measures how many units of one country’s currency are needed to buy the same basket of goods and services with a given amount of another currency
What is the importance of using PPP between countries?
Purchasing Power Parity (PPP) is important for comparing living standards and economic productivity between countries. It adjusts for differences in price levels, allowing a more accurate comparison of what people can buy with their income in different countries
What are the drawbacks of using GDP to compare living standards?
- GDP is purely a single measure of living standards, it only measures change in income. Health and education factors are also pivotal to living standards
- GDP ignores the distribution of income and wealth/inequality in a country, increase in GDP may only benefit the elite or a small part of the population
What is Real GDP per capita?
It is the total economic output of a country, adjusted for inflation, divided by the population. It measures the average income per person in real terms.
