W1 - GDP Flashcards
(25 cards)
What is GDP?
Gross domestic product
Market value of the final goods and services produced in a country in a given time period (in boarders)
What is GNP?
Gross National product
(if Germany had a factory in the US, outputs would be included in US’s GDP but Germany’s GNP)
When would a country be in a recession?
If GDP falls for 2 quaters in a row
What is the G7 and name the counties?
Industrialised countries that discuss gobal economic activity
- US, Uk, Canada, France, Germany, Italy and Japan
What is national accounts?
Record macro transactions, macropicture of what happens at an aggregate level
What is the UK’s national account called and what does it include
The Blue Book
Includes: UK’s GDP, Consumption, Trade Balance, PSNBR
What is PSNBR?
public sector net borrowing requirements
What does GDP need to be and how does it do it?
Accurate so removes depreciation
What are the 2 approaches to calculating GDP
- The expenditure approach
- Income approach
What is the expenditure approach?
Production to supply
All total spending on final goods and services
Formula for the expediture approach of GDP and what do the letters mean
GDP = C + I + G + (X-M)
C - new goods/ services
I - New capital goods, inventories (anything produced in yr)
G - Gov purchases (not including spending on those economically inactive - no producing)
X - Emports
M - Imports (ROW)
Are shares in GDP
No as just an exchange of money
What is the income approach of GDP?
Sums up all the income earned by factors of production
e.g wages(labour) , rent (land), interest (capital), profit (entrepreneurship)
What are the 3 streams that the blue book separates income into
- compensation of employees
- Gross operating surplus
- Mixed income (renting)
What happens to the subsidies in final price?
They are taken out
Phases of economics developement
- Agriculture
- industrialization
- services (80% of UK)
What is nominal GDP?
Current market price using the effet of time as a measurement (inflation)
PxQ
- without adjusting for inflation
what is Real GDP
Actual quantity of goods and services produced valued at a constant price from the base year
- strips out inflation
What is Purchasing power parity (PPP)?
Exchange rates, compaing price levels of countries
Name some limitations of GDP
- Ignores household production (no tranaction like childcare) - non market activity, undervalues groups
- No underground economics activity (non legal transactions like drugs)
- Misses - Happiness, community, Human rights
- Doesn’t take into account economics growths sustainability
- Includes bombs and weapons as inventory
- Ignores environmental damage (increase production = pollution)
Alternatives to GDP
- Human development index
- Social progress index - measures social welfare (basic human needs, foundations of wellbeing, opportunity)
- Happiness, National wellbeing
Items in the income approach for GDP
- Compensation of employees
- Gross operating surplus
- Mixed income
- Gross domestic income
Indirect taxes less subsidies
If nominal GDP is increasing, does that mean the economy is growing
Not all the time
1. Could be an increase in output (affecting real economic growth)
2. nominal ignores the effect of inflation
- Use REAl GDP
How to work out the GDP deflator
Nominal GDP/ Real GDP x 100
