National Income Statistics Flashcards
(21 cards)
What does National Income refer to?
A country’s total output
People earn income from producing output and then spend that income on the output.
How is National Income Statistics defined?
A general term for a number of measures of a country’s economic activity.
What is the relationship between total output, total income, and expenditure in theory?
Total output should be equal to total income and expenditure.
What does a growing economy’s output indicate about living standards?
Living standards of people in the country will be improving.
What action might a government take if economic growth is slower than expected?
Introduce policies to stimulate further growth.
What are the two main measures of national income?
- GDP
- GNI
What is GDP commonly used for?
To assess what is produced, earned, and spent in an economy.
How does GNI differ from GDP?
GNI focuses on income earned by a country’s residents and firms, including revenues earned outside the country.
Why might GDP and GNI differ?
Income earned from the country by foreigners is removed from GNI.
What is an example of a country where GDP is significantly higher than GNI?
Ireland.
What are the three popular methods of measuring GDP?
- The output method
- The income method
- The expenditure method
What does the output method measure?
The value of the output produced by industries.
What is important to avoid when using the output method?
Double counting the same output.
What should be excluded in the income method of measuring GDP?
Income from transfer payments.
How is GDP calculated using the expenditure method?
By adding together all consumer expenditure, government spending, total investment, changes in stocks, and the difference between exports and imports.
What do market prices refer to in GDP and GNI measurement?
The price paid by a consumer, including taxes.
What are basic prices in the context of GDP and GNI?
Prices charged without any government intervention.
What do gross values in GDP and GNI include?
Output of capital goods both used to replace existing capital goods and those bought to increase capacity.
What do net domestic product and net national income include?
Only net investment.
What is net investment?
Gross investment minus the value of replacement capital goods.
What is the value deducted from net investment known as?
Depreciation or capital consumption.
