Comparing Growth PPP

• What does PPP stand for in economics?

  Purchasing Power Parity
• What is the main use of Purchasing Power Parities (PPPs)?

  To compare living standards internationally
• What is a limitation of using GDP for international comparisons?

  It fails to account for localized prices
• Why is GDP per capita less useful for comparing living standards?

  It doesn't reflect purchasing power differences
• How does PPP affect the perceived gap between rich and poor countries?

  It narrows the gap by adjusting for costs
• If you have $100, how does PPP help in comparing purchasing power?

  It shows what can be bought in different countries
• What does PPP involve when comparing economies?

  Comparing a basket of goods and services
• What is GDP (PPP)?

  GDP valued using US product prices
• How is GDP (PPP) expressed for comparison?

  In a common currency, typically US dollars
• What is a challenge in computing PPP?

  Assigning US dollar values to all goods
• What is GDP (PPP) per capita?

  GDP (PPP) divided by population size
• Why do economists prefer GDP (PPP) per capita?

  It reflects per-capita welfare better
• What is the Trade Cycle in economics?

  • Economies go through 'boom' and 'bust' cycles
  • Long-term growth trend increases over time
  • Each generation should have higher GDP than previous
• What was Hayek's view on government spending during a recession?

  Governments should not spend to aid recovery
• How did Keynes view government intervention in a recession?

  Governments should spend to boost recovery
• What does the output gap illustrate in economics?

  • Difference between actual growth and long-term growth rate
  • Positive and negative gaps indicate economic performance
• What is a characteristic of recessions in the economic cycle?

  They are a cyclical part of an economy
• What follows a recession in the economic cycle?

  Recovery follows as part of the cycle
• What does the long-term trend growth rate indicate?

  Each boom is greater than the previous one
• How should society's economic condition change over generations?

  Society should be better off than previous generations