The Measurement Of Macroeconomic Performance

Question 1

What is the standard of living?

Answer 1

• Measures our material welfare
• Refers to wealth, comfort, material goods and necessities

Question 2

Measurements of the standard of living?

Answer 2

• Usually GDP per capita
• Alternatives: HDI ( life expectancy and education), GNI ( gross national income ), homicide rates

Question 3

What is the GDP?

Answer 3

• The value of all final goods and services produced in an economy in a year

Question 4

Benefits of using GDP

Answer 4

Income = output = expenditure (payment on goods/services)
- measure of growth
- measure of living standards

Question 5

What are the issues of using GDP as a measure?

Answer 5

• Double counting ( especially if the output measured is used): including the good in the primary sector and counting again the secondary sector inflating GDP measure
• Informal activity ( business that are not registered, illegal activity, informal DIY activity )