2.1.1 economic growth

• What does GDP stand for?


  Gross domestic product
• what is GDP the measure of?

  economic growth of a country
• what does GDP measure?


  total expenditures, output and input
• What are the 3 injections in the circular flow model of GDP?


  Government spending (G) business investment (I) exports (X)
• What are 3 withdrawals in the circular flow of model of GDP?


  tax (T) savings (S) imports (M)
• real income


  income - inflation
• GDP per capita


  GDP per person
• GNI


  gross national income

  (without the country and from companies abroad that belong to TNC's within the origin country)
• GNP


  gross national product
• how to turn nominal GDP to real GDP


  (100/price index) x nominal GDP
• PPP adjustment


  • PPP adjusts for exchange rates
  • changes in rates effect GDP
• what does GDP not include


  • sales of assets
  • sales of second-hand items
  • transfer payments
• GDP YoY


  yearly comparison
• GDP QoQ


  quaterly comparison
• if GDP growth is positive


  economic growth
• if GDP growth is negativefor 2 consecutive quaters

  recession
• GDP measured expenditure method


  C + I + G (X-M)
• limitations of using GDP to measure living conditions


  • doesn't include informal economy
  • not everyone declares their income
  • hidden economy
• what is barter


  trade with goods not using money
• Easterling paradox


  each additional thing adds less satisfaction

  e.g. buying 1 car makes you happier than buying 2 as the second one makes less of an impact on your life than the 1st
• what shape does the Easterling paradox curve have


  steep and increasing then levels of and flat/constant
• what are the functions of money?


  medium of exchange, measure of value, store of value, method of deferred payment