Lecture 1

• Define Human Development Index (HDI).

  HDI measures average achievement in three dimensions: Health (life expectancy at birth), Education (expected years of schooling and mean years of schooling for adults), and Standard of Living (gross national income per capita). It is the geometric mean of normalized indices for each dimension.
• Who developed the Human Development Index (HDI) and why?

  The United Nations developed HDI in 1990 based on Amartya Sen's idea to measure development through capabilities rather than just economic growth.
• Explain the Expenditure Approach for measuring GDP.

  The Expenditure Approach measures GDP as the total spending on a nation's final goods and services.
• Explain the Income Approach for measuring GDP.

  The Income Approach measures GDP as the total national income plus indirect taxes minus subsidies.
• Explain the Output Approach for measuring GDP.

  The Output Approach measures GDP as the total value of goods and services produced.
• What's the difference between Nominal GDP and Real GDP?

  Nominal GDP is measured using current prices, while Real GDP is adjusted for inflation, using constant prices.
• What are Purchasing Power Parities (PPPs)?

  PPPs are indicators of price level differences across countries used to convert national currencies into an artificial common currency (Purchasing Power Standard, PPS) for accurate comparisons of living standards.
• How is long-term economic growth estimated?

  Long-term growth is estimated using Ordinary Least Squares (OLS) regression of the natural logarithm of per capita GDP on time, where the cumulative annual growth rate is approximately the regression coefficient.
• How is short-term economic growth measured?

  Short-term growth is measured by quarter-on-quarter and year-on-year growth rates of chain-linked volumes.
• What are the main explanatory factors of long-term economic growth?

  Productivity and Innovation. Productivity, including Total Factor Productivity (TFP), and Innovation are essential for enhancing productivity and long-term economic growth.
• Define Labour Productivity.


  Labour Productivity is calculated as GDP divided by Employment.
• Define Employment Rate.


  Employment Rate is calculated as Employment divided by Population (aged 16-64 years).
• Define Demographic Factor in the context of economic growth.

  The Demographic Factor is calculated as Population (aged 16-64 years) divided by Total Population.
• What are the key metrics for assessing economic growth?

  Key metrics include Per Capita Income (GDP / Population), Labour Productivity (GDP / Employment), Employment Rate (Employment / Population aged 16-64), and Demographic Factor (Population aged 16-64 / Total Population).
• What is the significance of HDI trends in the EU?

  HDI trends in the EU show variations in human development levels across different countries and provide a mean HDI value for the EU27, segmented by development levels and compared globally.
• Why is adjusting for purchasing power and inflation important in measuring GDP?

  Adjusting for purchasing power and inflation ensures that GDP comparisons across countries and over time reflect real differences in living standards and economic performance, not just price level changes.
• What is the importance of innovation in economic growth?

  Innovation is crucial for enhancing productivity, which in turn drives long-term economic growth by improving efficiency and creating new products and markets.
• How does the confidence interval for a coefficient in a regression model inform us?

  A confidence interval provides a range within which the true value of the coefficient is likely to fall. If the interval does not include zero, the coefficient is significantly different from zero at the given confidence level.
• What does R² represent in a regression model?

  R² represents the proportion of the variance in the dependent variable that is predictable from the independent variable(s). In this context, an R² of 0.06 means 6% of the variance in savings is explained by annual income.
• Countries are classified into 4 levels of human development according to their HDI score:

  • HDI ≥ 0,80 = very high human development
  • 0,70 ≤ HDI < 0,80 = high human development
  • 0,55 ≤ HDI < 0,70 = medium human development
  • HDI < 0,55 = low human development
• $HDI =$$Health^\frac{1}{3}*$$Education^\frac{1}{3}*$$Income^\frac{1}{3}$
• Index for income:

  A) 100

  B) 100

  C) 75.000

  D) actual value

  E) ln (log op rekenmachine

  
• Index for education and health:

  A) health

  B) education

  C) minimum

  D) minimum

  E) maximum

  F) actual value

  
• How to calculate the index for education:

  • Expected Years of Schooling (EYS)
  • Mean Years of Schooling (MYS)

  actual value - min value/max value - min value = index for education

  (Use this formula for both EYS and MYS + then multiply in a square root!!)