Economic Growth and Living Standards - Vocabulary

Vocabulary flashcards covering definitions related to economic growth, measurement, AD effects of tax cuts, and material vs non-material living standards.

Economic growth

A sustained increase in a country’s real output of goods and services over time, typically measured by the annual growth rate of real GDP or real GDP per capita.(real GDP is GDP when interest is factored in)

Real GDP

The value of all final goods and services produced in an economy adjusted for price changes (inflation), using constant base-year prices.

Real GDP per capita

Real GDP divided by the population; a common measure of average living standards.

Aggregate demand (AD)

The total spending on goods and services in an economy at a given price level; components include consumption, investment, government spending, and net exports.

Tax cuts (individual income tax)

Reductions in individuals’ income taxes that raise disposable income and can boost consumption and aggregate demand.

Tax cuts and aggregate demand

Lower personal income taxes increase disposable income, raise consumption, and shift AD to the right, potentially increasing real GDP in the short run.

Material living standards

Economic well-being tied to income and the consumption of goods and services, often proxied by real GDP per capita.

Non-material living standards

Quality-of-life aspects not directly bought with money, such as health, education, environment, safety, leisure, and overall well-being.