2.1 measures of economic performance

• What is economic growth defined as?

  Rate of change of output
• What does economic growth indicate about a country's productive potential?

  It shows an increase in productive potential
• How is economic growth typically measured?

  Percentage change in real GDP per annum
• What does a shift of the PPF represent?

  Increase in productive capacity
• What does GDP stand for?

  Gross Domestic Product
• What does GDP measure?

  Total value of goods and services produced
• What does GDP indicate about a country?

  Standard of living
• What is the difference between total GDP and GDP per capita?

  GDP per capita divides total GDP by population
• When does GDP per capita grow?

  When national output grows faster than population
• What is the difference between real GDP and nominal GDP?

  Real GDP adjusts for inflation, nominal does not
• How can real values be described?

  As the volume of national income
• How can nominal values be described?

  As the value of national income
• How do you calculate nominal GDP?

  Multiply price by quantity for each year
• How do you calculate real GDP?

  Multiply quantity by price in base year
• What does GNI stand for?

  Gross National Income
• What does GNI include?

  Goods, services, and net overseas payments
• How does GNP differ from GDP?

  GNP includes income from citizens abroad
• What does comparing national income levels over time show?

  Whether a country has grown or shrunk
• Why is it important to use real, per capita figures?

  To accurately reflect living standards
• What can inflation do to GDP figures?

  It can give a false impression of growth
• Why is GDP per capita used for comparisons between countries?

  It accounts for population differences
• What do Purchasing Power Parities (PPP) compare?

  Cost of a typical basket of goods
• How do PPPs help in comparing living standards?

  They account for cost of living differences
• What happens to the difference between highest and lowest GDPs when using PPP?

  It becomes smaller due to lower costs
• What is the Big Mac Index?

  A comparison of Big Mac prices globally
• What are some problems with using GDP to compare living standards?

  Data inaccuracy and hidden markets
• How does the hidden market affect GDP calculations?

  It leads to underestimation of GDP
• What does GDP not account for in poorer countries?

  Home-produced services and subsistence farming
• What can errors in calculating the inflation rate affect?

  Accuracy of real GDP calculations
• Why can comparing GDP over time be difficult?

  Methods of calculation may change
• What should be removed from GDP calculations?

  Transfer payments without output increase
• How can income distribution affect GDP comparisons?

  It may not reflect living standards for all
• How has the quality of goods and services changed over time?

  It has generally improved significantly
• What issue arises from comparing different currencies?

  Choosing the right unit for comparison
• How can defense spending affect GDP?

  It can increase GDP without improving living standards
• What other factors can affect living standards?

  Education and healthcare access
• What did the UN happiness report identify as key factors?

  Real GDP, health, life expectancy, and more
• What did the Measuring National Wellbeing report find?

  Health and relationships affect well-being
• What scale is used in the Measuring National Wellbeing report?

  0 to 10 scale for life satisfaction
• What trends were observed in life satisfaction from 2012-2016?

  Life satisfaction rose, anxiety fell slightly