2.1.1 Economic Growth

What is Economic Growth measured by?

GDP

What is GDP?

GDP is the monetary value of all final goods and services in an economy over a time period.

What is Living Standard?

It refer to the quantity or quality of material good and services available to a given population.

What is GDP-Per Capita? How is it calculated?

This is a measure of a country’s output that account for its number of people. It is calculated by dividing by the

Total GDP/N.O of People

What does Real mean?

Real means minus inflation

What is Nominal GDP vs Real GDP?

Nominal GDP is without taking in to account inflation.

Real GDP takes inflation into account.

What is Value vs Volume?

• Value measures the total monetary worth of Goods and Services.

• Volume measures the physical quantity produced.

What are the Limitations of using GDP to compare living Standards?

1) Inequalities

2) Pollution

3) Inaccuracy of Data

4) Quality of G & S

Why is Inequality an Limitation of using GDP to compare living standards?

• As an increase in GDP may be due to a growth in income of just one group of people.

Why is Pollution a Limitation of using GDP to compare living standards?

As Higher GDP may result in congestion and pollution.

Why is Inaccuracy of data a Limitation of using GDP to compare living standards?

As some countries are inefficient at collecting or calculating data and therefore comparisons can become less effective.

Why is Quality of G & S a Limitation of using GDP to compare living standards?

As the quality of G & S is much higher than those fifty years ago.

What is Gross National Income?

Gross National Income (GNI) is the sum of a country’s gross domestic product (GDP) plus net income from abroad.

What is Purchasing Power Parity (PPP)?

Is a method that compares the cost of a standard basket of goods and services across countries by converting prices into a common currency to measure relative living costs and economic value.

Why should you compare growth rates between countries over time?

To provide context, compare similar countries, assess economic welfare, and understand changes in living standards.

Why should you look beyond GDP to measure living standards? (UK National well-being)

Because GDP has limitations, so surveys measuring anxiety and happiness are used as alternatives.

What is the Easterlin Paradox and it’s impact on measuring happiness and how should living standards be measured?

Income and happiness are positively correlated, but after a certain income level, happiness can fall which is the (Easterlin Paradox), so living standards should be measured using multiple objectives beyond income.