GDP

Question 1

Definition

Answer 1

The total value of goods and services produced in an economy in a given time period.

Question 2

Expenditure

Answer 2

Changes in the value of stocks
C + G +I + X - M

Question 3

Factor incomes

Answer 3

Wages and salaries
Profits of private and public sector businesses
Rental income from ownership of land

Question 4

Value of output

Answer 4

Value added from each of the main sectors:
- Primary (e.g. farming, forestry, mining)
- Secondary (construction and manufacturing)
Tertiary (e.g. tourism and healthcare)
Quaternary (e.g. business consultancy)

Question 5

Value GDP

Answer 5

Measures the monetary value of goods and services

Question 6

Volume GDP

Answer 6

Measures the physical quantity of goods and services

Question 7

Nominal GDP

Answer 7

Not inflation adjusted. Expressed as current prices.

Question 8

Real GDP

Answer 8

Adjusted for the effects of price inflation. Expressed as constant prices.

Real value in current year = nominal value in current year/price index in current year x 100

Question 9

GDP per capita

Answer 9

Measures the average economic output per person in a country.

Per capita GDP = Total GDP/Population

Question 10

Advantages of per capital GDP

Answer 10

1. Helps to understand the average standard of living in a certain nation
2. Used to compare the economic performance of different countries while considering population sizes

Question 11

Disadvantages of per capita GDP

Answer 11

1. Ignores inequality
2. Looks at gross income rather than Yd
   Median disposable income may be better for measuring living standards
3. Doesn’t take into account shadow economy or unpaid work (e.g. voluntary work)