measures of economic activity

Question 1

national income

Answer 1

total income of an economy/ total output. includes wages, interest, rent & value of aggregate output from AS + AD

Question 2

GDP + GDP *per capita *

Answer 2

gross domestic product: measure of aggregate output of an economy
GDP per capita: GDP/population - indicator of domestic output per person in population

Question 3

GNI + GNI per capita

Answer 3

Gross national income: measure of total income recieved by residents of a country

GNI per capita: GNI/population - amount of income per person in an income

Question 4

Nominal GDP & Real GDP

Answer 4

Nominal GDP
value of current output in current prices
= C + G + I + (X-M)

real GDP=
value of current output at constant (base year) prices.
= (Nominal/deflator) x 100

Question 5

formula

GDP deflator

Answer 5

(Nominal GDP/real GDP) x 100

Question 6

business cycle

Answer 6

GDP on verticle axis
time on horizontal
consists of short term fluctuations - expansions and contractions

Question 7

stats problems with NI

NI = both GDP & GNI

Answer 7

1. (a) non market sector is excluded from official figures
2. (b) underground markets not included
3. does not account for negative externalities
4. does not measure the depleation of natural resources
5. does not measure improvements in quality of goods
6. purchasing power differs in different countries

Question 8

Lorenze curve

Answer 8

plots cumulative % population on x-axis and cumulative % income on y-axis. on same scale from 0-100%

Question 9

measures GDP/GNI do not accurately measure standard of living

SoL often depends on things that NI does not measure

Answer 9

1. composition of output (merits goods vs. luxury goods)
2. does not reflect life expectancy, health and education
3. does not cnsider distribution of income
4. does not consider or measure the increase in leisure time
5. does not consider other impacts e.g. crime rates, gender inequality, political freedom

Question 10

factors to consider when comparing int. SoL using NI figures

Answer 10

1. per capita income figures must be used
2. different distributions of income must be taken into account - per capita figs. are averages
3. composition of output varies from country to country
4. size of non-market sector differs from country to country
5. size of underground markets differs in countries
6. cost of living varies (PPP) is a much better reflection
7. Green GDP - does not account for environmental impacts

Question 10

purchasing power parity

Answer 10

special exchange rates between currencies that makes buying power = US$1