2.1.1: Economic Growth

• Economic Growth: Rate of increase in long term productive potential of a country
• Economic Growth is usually measured by the percentage change in real GDP per year
• GDP: Total value of goods and services produced in a country within a year
• Total GDP: Overall GDP in a country
• GDP Per Capita: Total GDP / Population of a country
• Real GDP: Total value of goods and services adjusted for inflation
• Nominal GDP: Total value of goods and services at current prices
• Gross National Income (GNI): Value of goods and services produced by a country over a period of time, plus what citizens of the country who live abroad earn, and minus what foreigners earn in the country
• Gross National Product (GNP): Value of goods and services produced by a country over a period of time, whether they are foreigners or not
• Rate of Economic growth can be compared through Real GDP Per Capita
• A Purchasing Power Parity is an exchange rate of one currency for another, comparing how much a basket of goods costs in different countries
• Purchasing Power Parities are useful when trying to work out cost of living in different countries e.g £2 in Kenya is enough to live on, but £2 isn't enough in the UK
• Problems of using GDP to compare standard of living

  Inaccuracy of data over time

  Inequality: Increase in GDP may be due to one group of people e.g the rich

  Quality of goods and services: Quality has increased but prices haven't, so it doesn't reflect real living standards

  Comparing different currencies: Cost of living is different in different countries

  Spending: Spending on things like defence do not help standard of living
• 7 measures of national happiness

  Real GDP Per Capita

  Health

  Life Expectancy

  Having someone to count on

  Perceived freedom to make life choices

  Freedom from corruption

  Generosity
• Happiness and income are positively related at low incomes, but at higher incomes it has no effect. Additionally social status makes us happier