First Lecture

• What does GDP stand for?

  Gross Domestic Product
• What type of measure is GDP?

  It is a market-based measure of aggregate output
• Is GDP a flow variable or a stock variable?

  GDP is a flow variable
• How can GDP be analyzed?

  • From the production side
  • From the income/expenditure side
• What is the first definition of GDP?

  GDP is the sum of value added plus taxes and less subsidies on products
• What is value added in the context of GDP?


  Value added is the sterling value of output after correcting for the cost of inputs
• Why is value added important in calculating GDP?

  It helps avoid double counting
• A good example of a flow variable is your income, whereas the equivalent stock variable is your wealth. Another is deficits being a flow variable with debt as a stock.
• What is the second definition of GDP?


  GDP is the sum of final uses of goods and services plus exports and less imports of goods and services
• What is the third definition of GDP?


  GDP is the sum of uses in the total economy generation of income account
• What do the three definitions of GDP allow for?

  • They permit three different approaches to be used in the estimation of one GDP estimate
  • This is due to data availability
• What is not the single measure by which output can be measured?

  GDP estimates
• What does GNI measure compared to GDP?

  GNI measures the economic activity of resident economic units regardless of geographic location
• How is GNI calculated?

  By adding all earnings made abroad by residents to GDP and subtracting the earnings of non-residents within the country
• What is the balance of GDP and GNI called?

  The balance on primary international income
• What does it indicate if GNI is greater than GDP?

  It indicates that a country has a surplus of their primary income balance
• Give an example of a situation where GNI might be greater than GDP.

  When developing nations receive large remittances from residents working abroad
• What is not the single measure by which output can be measured?

  GDP estimates
• What does GNI measure compared to GDP?

  GNI measures the economic activity of resident economic units regardless of geographic location
• How is GNI calculated?

  By adding all earnings made abroad by residents to GDP and subtracting the earnings of non-residents within the country
• What is the term for the difference between GDP and GNI?

  The net of GDP and GNI is called the balance on primary international income
• What does it indicate if GNI is greater than GDP?

  It indicates that a country has a surplus of their primary income balance
• Give an example of a situation where GNI might exceed GDP.

  When developing nations receive large remittances from residents working abroad
• What is not the single measure by which output can be measured?

  GDP estimates
• What does GNI measure compared to GDP?

  GNI measures the economic activity of resident economic units regardless of geographic location
• How is GNI calculated?

  By adding all earnings made abroad by residents to GDP and subtracting the earnings of non-residents within the country
• What is the balance of primary international income?

  The net of GDP and GNI
• What does it indicate if GNI is greater than GDP?

  It indicates that a country has a surplus of their primary income balance
• Give an example of a situation where GNI might be greater than GDP.

  When developing nations receive large remittances from residents working abroad
• Does a high GDP necessarily indicate high welfare in a country?

  No, high GDP does not always mean high welfare.
• What factors should be considered when comparing GDP and welfare between two countries?

  • GDP per capita
  • Average working hours
  • Work-life balance
  • Environmental impact
  • Quality of life indicators
• How would you evaluate the welfare of a country with a GDP per capita of £25,000 and an average working week of 90 hours compared to another with a GDP of £22,000 and a 45-hour work week?

  By considering GDP per hour worked and the impact of long working hours on quality of life.
• What is the implication of increasing GDP growth by 1% through mining and consuming brown coal resources?

  It raises GDP but may not translate to higher welfare due to environmental degradation.
• What was the estimated contribution of prostitution to GDP in 2021 according to the ONS?

  £3.5 billion
• What was the estimated contribution of drugs to GDP in 2021 according to the ONS?

  £4.4 billion
• What ethical considerations arise from including illegal activities in GDP calculations?

  • Legitimacy of counting illegal activities
  • Impact on societal values
  • Potential normalization of harmful practices
  • Questions about the definition of economic activity
• Should activities like slavery and the production of nerve agents be included in GDP calculations?

  This raises ethical questions about what constitutes legitimate economic activity.
• What has GDP become synonymous with in economic discussions?

  Welfare
• Why is it important to look at GDP per capita?

  Because it provides a more accurate measure of welfare than total GDP
• Is GDP a flow or a stock variable?

  Flow variable