Economics - Economic Growth

• GDP


  The market value of all finished goods and services produced within a country in a year
• Real GDP


  The value of GDP at constant prices after being adjusted for inflation
• Nominal GDP


  The value of GDP at current prices without being adjusted for inflation
• GNI - Gross National Income

  The GDP plus net income from abroad
• GDP per capita


  The value of GDP divided up by the population of a country. (GDP/population)
• GDP measurement - Output

  Total final value of all products of economic sectors:

  • Primary
  • Secondary
  • Tertiary
  • Quaternary
• GDP measurement - Income

  Total income earned by factors of production:

  • Wages (labour)
  • Rent (land)
  • Interest (capital)
  • Profits (enterprise)
• GDP measurement - Expenditure

  Total spending by all agents in an economy:

  • Private consumption
  • Firm investment
  • Gov spending
  • Net Exports
• GDP - Advantages

  • Measured frequently and widely
  • Allows us to compare countries
  • Shows the size of an economy
• GDP disadvantages - Hidden economy

  The hidden economy is all of the unrecorded transactions in a country. The GDP doesn’t include the hidden economy thus GDP underestimates the real income per capita.
• GDP disadvantage - Wealth inequality

  The GDP is an average so it doesn’t show the distribution of wealth and therefore hides the wealth inequality.
• GDP disadvantage - Negative impact on environment/living conditions

  The GDP doesn’t show pollution and congestion in a country which could lead to lower living standards
• GDP disadvantage - growth not sustainable

  GDP growth may not be sustainable if scarce resources are being used up so GDP may eventually fall