Measures of Economic Performance

Question 1

What are the four factors of production?

Answer 1

1) Capital
2) Enterprise
3) Labour
4) Land

Question 2

Who owns these factors of production?

Answer 2

Owned by households

Question 3

What are the four factor incomes?

Answer 3

1) Interest
2) Profits
3) Wages
4) Rent

Question 4

What is a factor income

Answer 4

A reward for providing factors of production

Question 5

How do households and firms interact?

Answer 5

Households provide firms with FoPs
Firms provide households with goods and services

Question 6

How do households and government interact?

Answer 6

Households give the government income tax
Government gives households public services and transfer payments

Question 7

How do firms and government interact?

Answer 7

Firms give the government corporation tax
Government gives firms grants and subsidies

Question 8

How do households and banks interact?

Answer 8

Households save in banks
Banks provide interest

Question 9

How do firms and banks interact?

Answer 9

Firms save in banks
Banks provide loans and interest

Question 10

How do government and bank interact?

Answer 10

Government gives bank

Question 11

Name three leakages in the economy

Answer 11

1) Imports
2) Taxes
3) Saving

Question 12

Name three injections in the economy

Answer 12

1) Exports
2) Government spending
3) Investment

Question 13

How does the level of national income rise?

Answer 13

When the number of injections increases. Also, leakages increase as well

Question 14

Name a critique of GDP

Answer 14

“It’s purely a measure of money and not how it’s used - disregards other factors”

Question 15

What is GDP?

Answer 15

GDP is the value of all the final goods and services produced in an economy

Question 16

National income, expenditure and output equation

Answer 16

National income = National Output = National Expenditure

Question 17

What is the difference between income and wealth

Answer 17

Income is the amount of money received on a regular basis (salary/wage, or dividends)
Accumulation of assets (property, cars, jewellery, stocks and shares)

Question 18

GDP Rank

Answer 18

1) US
2) China
3) Japan
4) Germany
5) UK
6) India
7) France
8) Italy
9) Canada
10) South Korea

Question 19

What is GNI?

Answer 19

Gross National income - measures income (wages, salaries and investments) generated by the countries’ citizens

Question 20

What is GNP?

Answer 20

Gross National Product - Is the market value of all the goods and services produced in one year by labour and property supplied by the citizens of a country

Question 21

What is nominal value?

Answer 21

Provides a measure in simple monetary terms

Question 22

What is real value?

Answer 22

Provides a measure where the nominal value is adjusted for inflation

Question 23

What is total GDP?

Answer 23

Total GDP is the sum of all the output divided by spending from everyone in the economy

Question 24

What is GDP per capita?

Answer 24

Divides the total population
- Is more accurate
-

Question 25

Alternatives to GDP

Answer 25

HDI, GNP, GNI

Question 26

What is HDI?

Answer 26

• Measures broader definition of well-being and provides a composite measure of three basic dimensions of human development: a long life, access to knowledge and a decent standard of living
• Expected and mean years of schooling
• GNI per capita
• Life expectancy

Question 27

What is GPI?

Answer 27

• Takes into account GDP and cost of negative effects related to economic activity
• E.g., Cost of crime, cost of ozone depletion, cost of recourse depletion
• It nets the positive and negative results of economic growth

Question 28

What is HPI?

Answer 28

Concentrates on the deprivation in the three essential elements of human life (same as HDI):
- Longevity, Knowledge, and a decent standard of living

Question 29

What is the gini coefficient

Answer 29

Measure of statistical dispersion most prominently used as a measure of inequality of income distribution or inequality of wealth distribution
- Rated between 0 and 1
- Or 0 and 100
- 0 being no inequality

Question 30

What is the Easterlin Paradox?

Answer 30

States that at a point in time, happiness varies directly with income, both among nations and within nations, but over time the long-term growth rates of happiness and income are not significantly related.