Macro - measures of economc performance

Question 1

What is economic growth?

Answer 1

The rate of change of output. Increase in the long term productive potential of the country.

Question 2

How is economic growth typically measured?

Answer 2

% Change in real GDP per annum or the shift of PPF.

Question 3

What is GDP?

Answer 3

Total value of goods and services produced in a country within a year. Indicator of standard of living in a country.

Question 4

What is GDP per capita?

Answer 4

Total GDP/number of people in a country

Question 5

When does GDP per capita grow?

Answer 5

If national output grows faster than the population over a given time period.

Question 6

Difference between real GDP and nominal GDP?

Answer 6

Real GDP has ben adjusted for inflation.

Question 7

What are 2 other national income measures?

Answer 7

Gross National Income (GNI) and Gross National Product (GNP)

Question 8

What is Gross National Income?

Answer 8

The value of goods and services produced by a country over a period of time plus net overseas interest payments and dividends.

Question 9

What is Gross National Product?

Answer 9

The value of goods and services over a period of time through labour or propery supplied by citizens of a country both domestically and overseas.

Question 10

What is a purchasing power parity?

Answer 10

An exchange rate of one country for another, which compares how much a typical basket of goods in the country costs compared to one in another country.

Question 11

Why are PPP’s useful?

Answer 11

It takes into account the cost of living and will help better compare living standards.

Question 12

What are problems of using GDP to compare Standard of living?

Answer 12

Inaccuracy of Data
Inequalities
Quality of goods and Services
Comparing different currencies
Spending

Question 13

Problem of using GDP to compare standard of living: Inaccuracy of data

Answer 13

• Some countries are inefficient at collecting or calculatin data
• There is a ‘hidden’ or ‘black’ market in which people work without declaring their income to avoid tax or to continue claiming benefits. so GDP is underestimated.
• Home-produced services arent accounted for. Farmers that grow and consume crops, DIY, housewives/husbands services.
• Methods used to calculate GDP overtime may change and so it will be difficult to calculate changes overtime.