Economic Growth

• What are Factors of Nominal GDP?

  • gives monetary values for data
  • not inflation adjusted
  • data for GDP is expressed at current prices
• What are Factors of Real GDP?

  • inflation adjusted
  • prices are held at the level of a chosen base year
  • GDP data is expressed at constant prices
• Is Nominal or Real GDP more accurate?


  Real as it takes into account the effects of inflation
• How do you calculate Nominal GDP in a given time period?


  Quantity of goods and services produced x current prices
• What does GDP stand for?

  Gross Domestic Product
• What is GDP?


  Measures the total value of national output of goods and services produced in a given time period .
• What does GNI stand for?

  Gross National Income
• What is GNI?


  A measure of wealth that calculates income instead of output.
• How to calculate GNI?

  GDP + Net Primary Income + Net Secondary Income
• What is Net Primary Income?

  Income earned from selling the factors of production, earning profits, wages, rent, interest.
• What is Net Secondary Income?


  Transfers of money between countries, such as remittances.
• What is GDP per capita?

  Measures the average economic output per person in a country.
• How to calculate GDP per Capita

  total GDP / population
• What is the Real Income Effect?

  As price level falls, the real value of income rises, so consumers can buy more with the same amount of income.
• What is the Balance of Trade Effect?

  A fall in the relative price level of country X could make foreign produced goods and services more expensive, causing a rise in exports and a fall in imports.
• What does PPP stand for?

  Purchasing Power Parities
• What is PPP?


  Exchange rates that equalise the purchasing power of different currencies for a common basket of goods.
• Why do you compare Rates of Growth?

  • Helps to assess economic performance
  • It can reveal disparities
  • It can highlight factors contributing to growth
  • It can reveal economic patterns and trends
  • It can identify periods of recession, expansion etc
• Limitations of using GDP to compare Living Standards:

  • GDP per Capita doesn't account for income inequality
  • GDP excludes non-market activities (household labour)
  • GDP doesn't measure quality of life, such as healthcare, happiness, education etc
• What's the relationship between incomes and happiness?

  Research shows that as income increases, happiness increases too, however, beyond a certain income level, happiness diminishes as income increases.