Measures of Econ Growth

• National income statistics provide a report card for governments to see how their economy is doing and measure economic performance.
• National income statistics allow governments to see whether they are meeting their objective of economic growth.
• National income statistics allow governments to evaluate policy and determine if past policy has been successful in increasing economic growth.
• National income statistics allow for a comparison of the performance of an economy compared to other economies out there in the world.
• GDP, or real GDP, is the value of all final goods and services produced in an economy in a year and is a measure of economic growth and living standards.
• The benefit of using GDP is that it gives us a measure of growth and living standards.
• The three ways of working out GDP are the income method, the output method, and the expenditure method.
• GDP can be adjusted for inflation.
• There are three problems with using GDP as a measure of growth and using GDP as a measure of living standards.
• The risk of double counting can be overcome by measuring the final value of all goods and services being produced.
• Informal activity, like black market activity and illegal activity, is not included in GDP, therefore GDP will be lower than it should be.
• GNI is calculated by adding net factor income to GDP.
• Environmental costs are difficult to monetize and are subjective, making Green GDP controversial.
• GNI is not influenced by FDI and therefore the repatriation of profit is not a concern.
• GNI, or GNI per capita, can be used to overcome the problem of using GDP, as it includes factor income regardless of where the factors of production are located.
• The Human Development Index (HDI) is often used alongside GDP to get a more holistic idea of living standards and how the economy is performing in terms of income, education, and healthcare performance.
• Net factor income is the income earned by domestic workers and firms regardless of where they are located, minus the income earned by foreign workers and foreign firms operating at home.
• China tried using Green GDP to overcome criticism about the country's high environmental costs, but found that when they did GDP figures dramatically fell and living standards were lower than shown by raw GDP.
• Green GDP is calculated by subtracting the environmental costs of production from GDP.
• Green GDP is a measure of GDP that accounts for the environmental costs of production, aiming to overcome the issue of not accounting for negative externalities of production.
• Green GDP can significantly reduce GDP figures, making it a politically sensitive thing to use.
• GDP is a measure of the final value of all goods and services produced in an economy in a year, and collecting that data can be challenging due to the large amount of information needed and the short space of time required for collection.
• The chance for error in collecting data for GDP is high, which is why often see two different GDP figures.
• Remittances are when domestic workers leave the country and work abroad to earn higher incomes, which are then sent back to the home country.
• GDP just looks at output, not the quality of output.
• GDP per capita is the average measure of individual incomes in the economy, adjusted for inflation.
• The issues with GDP per capita are the same as with GDP, including the exclusion of income earned abroad by domestic workers and businesses.
• GDP can be distorted due to foreign direct investment, as a lot of the income generated by foreign business will not stay in the domestic economy.
• Remittances are becoming more significant and GDP or GDP per capita will not take into account any factor income earned abroad.
• The negative externalities of production, such as cost of air pollution, resource depletion, resource degradation, loss of biodiversity, deforestation, and desertification, are not included in GDP.
• GDP does not consider the quality of life aspects that increase living standards, such as health related outcomes, level of health care, education, freedom, gender equality, and democracy.
• GDP does not take into account the distribution of income.
• Foreign direct investment is when foreign firms come and operate in your home country, which will count towards GDP because it is production in your home country.
• The problem with GDP is that a lot of the income generated by foreign business will be repatriated, which will not stay in the domestic economy itself.
• GDP does not provide information about the average level of individual incomes in the economy.