4.6,4.7 Real GDP, Economic Welfare

Define real GDP

measurement of monetary value of goods & services produced within a country w/out inflation over a period of time

Why can nominal GDP be misleading?

inflation

Real GDP = n__ GDP / GDP d__

nominal, deflator

NZ’s GDP: most contribution → least
>    T__ → s__ → unaccounted → p__

tertiary, secondary, primary

Why Real GDP?
>  Helps govt make informed d__ on economic p__

>>   As it now has better u__ of a__ of resources within the country

>>   e.g. country makes too much consumer goods = govt ↑tax c__ goods / ↓capital goods

>    Comparing s__ of living from 1yr → next

>>   ↑GDP = assumed ppl better off

>  Comparing standard of l__ with other c__/other areas of country

e.g. GDP per capita (unit 4.7)

decisions, policy, understanding, allocation, consumer, standard, living, countries

GDP Doesn’t…
>  Measure v__ of non-m__ trans. e.g. i__ trade, voluntary work

>  Measure s__ of economic activities driving growth

> Take i__ into account

value, market, illegal, sustainability, inequality

Define economic welfare

lvl of prosperity & quality of living standards in an economy

Measuring Economic Welfare
o   G__, real GDP, GDP per capita, Real GDP per capita

o   H__

o   G__ coefficient

o   Other e.g. li__, # of doctors, lvl of pollution etc

gdp, hdi, gini, literacy

Economic Development

>  ↑QoL & living s__ e.g. literacy, life expectancy, healthcare

>  If all other factors don’t change: economic growth = economic development

>>   ↑real GDP = ↑spent on h__/education (public goods)

However, products of economic growth can be wasted/kept by small wealthy elite

standard, healthcare

Define GDP per capita

avg income per head of pop

Why is GDP per capita a reliable measure of growth?

measures pop

Limitations of GDP per Capita
>   Doesn’t consider what ppl b__ w/ income

>   Real distribution of wealth can be u__; country can have very p__ areas

> Doesn’t consider v__ work (understates total output)

buy, unequal, poor, voluntary

What does HDI stand for?

human development index

The HDI is used by the UN to measure l__ standards & w__ in countries

living, welfare

Indicators of HDI
1.      Avg i__ (GDP per capita)

2.      Level of e__ (avg length of time a 25yr old spent on education)

3.      H__ (life expectancy)

income, education, healthcare

Limitations of HDI (doesn’t measure…)
o   Q__ factors e.g. gender equality, human rights

o   I__ distribution

o   E__ issues

o C__ diff.

qualitative, income, environmental, cultural

Gini Coefficient
>  measures i__ d__ across pop.
>  By Corrado Gini; 0 (0%) = perfect e__ ;; 1 (100%) = perfect i__

>> 1 theoretically possible via -ve income/wealth

>>   ↑Gini coefficient = ↑i__ (high-income indiv. receiving ↑% of pop. total income)

income distribution, equality, inequality, inequality