Theme 2 - 3 Flashcards
(17 cards)
What does Gross Domestic Product (GDP) measure?
Measures the total value of all output in the economy over a period of time.
GDP is a key indicator of economic performance.
What is Gross National Income (GNI)?
GDP + income residents have received from abroad (in the form of interest, rent, profits or dividends) - income leaving the country.
GNI provides a broader perspective on national income.
Define Real GDP per capita.
Nominal GDP adjusted for inflation.
It reflects the average economic output per person, accounting for price changes.
What is Economic Growth?
The increase in the value of the goods and services produced by an economy over a period of time, measured as the percentage rate of change in real GDP.
Economic growth is crucial for improving living standards.
What characterizes a Recession?
A fall in the value of the goods and services produced by an economy over a period of at least 6 months, measured by a decrease of real GDP for two consecutive quarters.
Recessions can lead to higher unemployment and lower consumer spending.
What is Purchasing Power Parity (PPP)?
The rate at which the currency of one country would have to be converted into that of another country to buy the same amount of goods and services in each country.
PPP is used to compare economic productivity and standards of living between countries.
What does Standard of living refer to?
The amount of goods and services that households have access to, a measure of material welfare of people living in an economy.
The baseline measure is real GDP per capita adjusted for purchasing power parity.
What is the Shadow economy?
Refers to illegal or underground networks where goods, services, or activities are traded outside the boundaries of official regulations, taxation, and oversight.
The shadow economy can impact tax revenues and economic statistics.
Explain the Kuznets curve.
A theory that suggests that economic inequality tends to increase during the early stages of economic development, but then decreases as a country becomes more developed.
The Kuznets curve illustrates the relationship between economic growth and income inequality.
What does the Environmental Kuznets curve suggest?
A theory that suggests that environmental pollution tends to increase as a country’s income increases during the early stages of economic development, but then decreases as a country becomes more developed.
This reflects the trade-off between economic growth and environmental quality.
What is a Trade cycle?
Shows how GDP changes over time, with actual growth being the change in real GDP and trend rate of growth as the average rate of growth over time.
Understanding trade cycles is essential for economic forecasting.
Define Boom in the context of the trade cycle.
In the trade cycle, where there is rapid GDP growth.
Booms are often characterized by increased consumer spending and investment.
What is an Output gap?
The difference between actual and potential output in an economy.
It indicates how well an economy is performing relative to its capacity.
What is a Negative output gap?
When GDP falls below its potential level, leaving spare capacity in the economy.
This often occurs during recessions.
What is a Positive output gap?
When GDP is above potential output or when nominal GDP continues to grow while the economy is at full capacity.
Positive output gaps can lead to inflationary pressures.
What is National wellbeing?
A multi-dimensional concept aiming to provide a more comprehensive measure of living standards and quality of life than GDP alone, taking into account various factors.
These factors include health, education, and environmental conditions.
What is the Easterlin Paradox?
Research finding in the 1970s that life satisfaction rises with average incomes but only up to a point; beyond that point, the marginal gain in happiness declines.
This challenges the assumption that higher income always leads to greater happiness.
