2.1.1 economic growth

What is the definition of economic growth?

• Increase in long term productive potential of a country

What is GDP ?

GDP is the value of goods and services produced in an economy within a year

What is the difference between RGDP and nominal GDP

Real GDP is adjusted to inflation however nominal is not

What's the difference between the value of GDP and volume of GDP

The value is the price and the volume is the amount

What is the difference between GDP per capita and total GDP

Per capita is the population and total GDP is the sum of all values together

What is Gross National Income (GNI)

The value of goods and services produced within the the economy within a year PLUS money entering/ leaving the country

What is ppp?

Purchasing power parity

What is the definition of the purchasing power parity ?

the rate of conversion of one countries currency to another to purchase the same goods and services

What are the cons of using GDP to compare living standards between different countries?

• doesn’t tell you a bout the inequalities off the country (rich vs poor)

• Doesn’t tell you about the quality of the goods and services

• PPP- having to convert to different currencies

• Inaccurate data

• Doesn’t tell you about spending habits

Two findings about real incomes and subjective happiness:

• positive correlation between happiness and low income

• Happiness and income depend on the people around us