Measuring Economic Growth Flashcards
(20 cards)
What are the four main macroeconomic indicators
1)The rate of economic Growth
2)The rate of Inflation
3)The level of Unemployment
4)The state of The Balance of Payments
What are macroeconomic indicators used for?
To measure a country’s economic performance. Governments use them to monitor how the country’s economy is doing.
What is GDP?
The total value of all final goods and services produced within a country over a given period of time, usually annually. It represents the national output and is used to assess the economic performance of a country.
How can you calculate GDP?
Adding up national expenditure or national income
What is the rate of economic growth?
The speed at which national output grows over a period of time
What is a Boom?
Long period of high economic growth
What is a Recession called?
If there’s negative growth for two consecutive quarters
What is an economic depression?
Sustained economic downturn which lasts a long period of time, worse than a recession.
How to measure the rate of economic growth?
( Change in GDP (£B) / Orignial GDP (B) ) x 100
Percentage change
GDP growth can be due to inflation, what’s not adjusted for this?
Nominal GDP - GDP figure that hasn’t been adjusted for inflation
What is GDP per capita?
GDP per capita can indicate the standard of living in a country.
GDP p/capita = GDP/Popn
What is GNI?
GNI is the GDP plus net income from abroad
What is GNP?
Similar to GNI - total output of citizens of a country, whether or not they’re a resident there.
What are GNI and GNP used for?
Compare living standards between countries.
GNI(/GNP) = Total GNI(/GNP) / popn
What is purchasing power parity?
PPP is used in comparisons of living standards
Why is it used?
Because using GDP per capita (or GNI/GNP) to compare living standards in countries that use different currencies, the exchange rate might not reflect the true worth, meaning it may not give an accurate price.
What is purchasing power?
The real value of an amount of money in terms of what you can buy for it
eg. $1 is one country will buy you more goods than in a more developed one.
PPP involves adjusting what?
The GDP per capita figure to take into account the differences in purchasing power - makes it easier and more accurate
What are the limitations of using GDP for comparisons?
Doesn’t take into account;
The extent of the hidden economy
Public Spending
The extent of income inequality
Workers hours, working conditions, environmental damage
Index numbers are used for what?
Making comparisons (percentage changes), changes up or down are expressed in numbers above or below 100
Base year = 100
above = increase
below = fall
