7 A-level Economics Edexcel keywords

Economic Growth, GDP, PPP and the Big Mac Index

what is value added

increase in the value of a produce at each successive stage of the production process

what is economic growth

increase in value of goods and services produced by an economy over a period of time

what’s the formula for rates of change

(new - old) / old x 100

how is growth USUALLY calculated

in real terms e.g. inflation adjusted

what is nominal GDP

GDP expressed at current prices which gives monetary value for data and isn’t inflation adjusted

what is real GDP

GDP expressed at current prices and adjusted for the effects of price inflation, prices are held at a chosen base level year

what is total GDP

total amount not adjusted (nominal)

what is GDP per capita

a measure of the total output of a country that takes GDP and divides by number of people in the country

what is the relationship between volume and value

Value = volume x price

GNI = GDP +….

income paid into the country by other countries e.g. interest and dividends

GNP = GDP + ….

income that residents have received from abroad - earned by non residents

what does GNI measure

all income of a country’s residents and business’s regardless of where its produced

what does GDP measure

the income of anyone within a country’s boundaries

what is PPP (purchasing power parity)

the idea that items should cost the same in different countries

what does PPP measure

how many units of one countries currency are needed to buy the same basket of g/s in another country with same money sum

how is PPP adjusted

for differences in the cost of living between countries

what does PPP do

estimate how much the exchange rate needs adjusting

what is the big mac index

an informal way of measuring the PPP between 2 currencies e.g. hamburger in Africa vs America

what’s the big mac index formula

price of big mac in one country (in its currency) / price of a big mac in another country (in its currency)

what does it mean if the big mac index value is lower

the first currency is under-valued compared with the second