3.1.2 standard of living and its indicators

• define standard of living

  level of economic welfare and social well-being of an individual and household. It includes material and non-material aspects
• define Gross Domestic Product

  measures the total value of all final goods and services newly produced within a geographical boundary of a country in a given year
• define Gross National Income

  the sum of factor incomes receivable by resident units
• define Nominal GDP


  measures the value of the economy's final output using prices that prevailed in the current year

  Nominal GDP = P x Q
• define Real GDP:


  measures the value of the economy's final output using prices that prevailed during some fixed base period

  Real GDP = P(current) x Q
• composite indices

  combine two or more indicators to provide a more holistic measurement
• Actual growth

  measure of real national output of economy over a time period
• potential growth

  increase in capacity of an economy to produce goods and services, compared from 1 period of time to another
• recession


  when economy experience two consecutive quarters of negative real GDP growth
• unemployment

  workers who are of legal working age, who are willing and able to work at the current wage rate, actively seeking employment but unable to find work
• underemployment

  labour is under-utilised, working below their productive capacity

  eg. working less hours than they like or workers not utilising skills at work
• full employment

  non-zero, low rate of unemployment that is compatible with price stability,when all those who are able and willing to work have gained employment
• productivity

  real output generated per unit factor of input used
• inflation

  increase in general price level of goods and services
• disinflation

  decrease in rate of inflation
• deflation

  decrease in general price level of goods and services
• PPP exchange rate

  an exchange rate that would allow a given amount of money in country A to buy the same amount of goods in country B after exchanging it into the currency of country B
• sustainable growth


  refers to a rate of growth which can be achieved without causing significant other economic problems, particularly for future generations. It implies positive and stable growth rate over an extended period of time
• inclusive growth


  is an economic growth that creates opportunity for all segments of the population and distributes the benefits of increased prosperity, both monetary and non-monetary terms fairly across society