Measures of economic performances Flashcards
(48 cards)
What is economic growth?
Rate of exchange of output
Increase of the long term production in a country
How is economic growth measured?
PPF shift
or
% change in GDP
What is GDP?
Gross domestic product
Measure of output used to compare countries (total value of goods/services produced in a country per year). Indicator of overall standard of living.
What is total GDP and GDP per capita?
Overall GDP of a country
GDP per capita is total GDP divide number of people in country
What is the difference between nominal GDP and real GDP?
Real GDP removes effects of inflation
Nominal GDP keeps inflation
What is GNI?
Gross national Income
Value of goods produced by a country over a period of time plus overseas interest payments and dividends (adds what a country earns from overseas investments and subtracts what foreigners earn in a country and send back home)
What is GNP?
Gross domestic product
Value of goods over a period of time through labour or property supplied by citizens of a country both domestically (GDP) and overseas.
Making comparisons about growth:
Over time
Changing national income levels show if county has grown or shrunk. Data compared to other countries. Growth figures compared to similar countries to see if they have done well. Can make judgement about economic welfare (living standards). Important to use per capita figures as if population grows, this may cause a rise in GDP without a rise in living standards. Real GDP aid used to strip out effects of inflation
Making comparisons about growth:
Between countries
Difference in populations, difference in total GDP doesn’t necessarily mean difference in living standards so to make comparisons we use GDP per capita.
What are purchasing power parties? PPP
An exchange rate of one currency for another which compares how much a typical basket of goods in the country costs compared to one in another country.
What is an example of PPP?
Big Mac Index - comparing the cost of the Big Mac throughout the world
What are the six key factors to the UN happiness report?
real GDP per capita
health
life expectancy
having someone to count on
perceived freedom to life choices
freedom from corruption
generosity
What are the problems of using GDP to compare standard of living?
Inaccuracy of data
Inequalities
Quality of goods/services
Spending
Comparing different currencies
Why is national happiness?
GDP only measures income but there are other factors affecting welfare
What is inflation?
What is deflation?
What is disinflation?
What are indices?
Nominal figures must be changed into real figures to make comparisons.
Choose one year for the base year and adjust all other figures into equivalent figures. RPI and CPI are most used. The base figure is given an index figure of 100
What is Consumer price index? CPI
ONS collects prices on 710 goods/services from thousands of shops in many locations and online sites. The prices are e updated every month. All prices are combined using information in the average household spending pattern to produce an overall price index.
What are the limitations of CPI?
What is Retail price index? RPI
RPI includes housing costs e.g mortgage, interest, council tax
CPI takes into account the fact that when prices rise people will switch
RPI excluded the top 4% of income earners and low income pensioners as they aren’t “average”
What are the causes of inflation?
Demand pull
Cost push
Growth of money supply
What are the effects of inflation on consumers?
What are the effects of inflation on firms?
What are the effects of inflation on the government?
