Economic Growth

• What is actual economic growth?

  An increase in the real GDP
• What does GDP stand for?

  Gross Domestic Product
• What does GDP mean?

  The total value of goods and services produced in a country's borders
• What is potential economic growth?

  An increase in the productive capacity of an economy
• What is a recession?

  Two successive quarters of negative economic growth
• What is the difference between nominal and real GDP?

  Nominal GDP is simply the money value of all products produced in a country in a year. Real GDP adjusts the nominal GDP, taking inflation into account
• What is GDP per capita?

  The GDP divided by the population
• What does GNI stand for?

  Gross National Income
• What does GNI mean?

  A measure of all income generated by a country both domestically and internationally
• What is the formula for GNI?

  GDP + Profits from international firms + Income from international citizens - Profits from foreign firms - Income from foreigners
• What are Purchasing Power Parities?

  Comparative measures of the relative purchasing power of different currencies
• What is quality of life?

  A measure of living standards that take into account more than just income
• Give some limitations of using GDP to compare living standards:

  • Differences in population
  • Differences in inflation
  • Methods of calculation
  • Differences in income distribution
• What is subjective happiness?

  A measure of how people feel about themselves
• Explain the Easterlin paradox?

  There is a positive relationship between income and happiness up to a certain level of income. After this point, marginal gains in happiness fall as income increases.