Growth

Question 1

How is nominal GDP measured

Answer 1

Its all the prices of goods and services added up

Question 2

What is real GDP

Answer 2

The quantity of stuff being produced in an economy

Question 3

How is real GDP measured

Answer 3

By adding up the quantity of goods and services being produced

Question 4

What is economic growth

Answer 4

An increase in real GDP

Question 5

What is nominal GDP

Answer 5

The total price of all goods and services produced in an economy

Question 6

Answer 6

Question 7

What is the formula for real GDP growth

Answer 7

Question 8

Answer 8

Question 9

What is real GDP per capita

Answer 9

It’s the amount of GDP per person

Question 10

Answer 10

Question 11

What is GDP

Answer 11

The amount that is produced in an economy in a year

Question 12

What does GNI stand for

Answer 12

Gross National Income

Question 13

What is the formula for GNI

Answer 13

GDP + Net income from abroad

Question 14

Why can real GDP be misleading

Answer 14

Income could be sent overseas

Question 15

What is gross national product

Answer 15

The same as GNI

Question 16

What is the Easterlin paradox

Answer 16

Initially happiness increases when average income increases
But only up to a point, after that point the marginal increases in happiness fall

Question 17

How does the UK measure happiness

Answer 17

ONC conducts National Well-Being Survey which asks four questions and does an average of the happiness

Question 18

What is a problem with the ONS national well-being estimate

Answer 18

The answer from people are normative statements as they are based on opinions

Question 19

Answer 19

Exchange rates are volatile (they change all the time)
Nominal GDP does not reflect differences between the price levels in each country

Question 20

What does PPP stand for

Answer 20

Purchasing Power Parities

Question 21

What is the Big Mac index

Answer 21

When you compare the prices of Big Macs in each country and represent the nominal GDP in terms of Big Macs to compare different countries

Question 22

How do you calculate PPP of two countries

Answer 22

Find the most commonly bought goods in both of the countries
See how much the goods cost in each country
Compare the price of the basket of goods of one country to another and make an exchange rate

Question 23

What is a PPP

Answer 23

Question 24

What are the five limitations when using Real GDP to measure living standards

Answer 24

Ignores:
1) Population changes
2) Income distribution
3) Types of goods and services
4) Underground economies
5) Subsistence economies

Question 25

Explain population changes as a limitation to using Real GDP as a measurement of living standards

Answer 25

If the real GDP increases but the population increases then the GDP per capita will decrease and living standards will decrease

Question 26

Explain income distribution as a limitation to using Real GDP as a measurement of living standards

Answer 26

Real GDP tells you how rich a country is overall but doesn't tell you how that wealth is distributed e.g. Saudi Arabia (royal family discovered oil and kept net worth to themselves)

Question 27

Explain type of goods as a limitation to using Real GDP as a measurement of living standards

Answer 27

Spending on goods with negative externalities increased AD and Real GDP but affected the living standards of the population e.g. fast food consumption

Question 28

Explain underground economies as a limitation to using Real GDP as a measurement of living standards

Answer 28

Real GDP doesn't measure illegal activities found in the underground economy Therefore it isn't an accurate measure of goods and services being produced so you can't measure living standards

Question 29

Explain subsistence economies as a limitation to using Real GDP as a measurement of living standards

Answer 29

Subsistence economy consists of people living off of what they make Since this production isn't recorded real GDP doesn't measure these goods and services

Question 30

What is actual growth

Answer 30

When Real GDP increases

Question 31

What is potential growth

Answer 31

When there's an increase in the productive potential in the economy

Question 32

What type of growth is occurring here

Answer 32

Actual because there is an increase in the Real GDP No potential because there was no increase in the productive capacity of the economy

Question 33

What type of growth is occurring here

Answer 33

Potential because the productive capacity of the economy is increasing There is actual growth because Real GDP has increased