Economics Theme 2

Economic growth

A measure of an increase in real gross domestic product.

GDP

The total amount of goods and services produced in a country in one year

Recession

A country is considered to be in recession, when it has contracted for 2 consecutive quarters

Economy

The state of a country/region in terms of production and consumption of goods and services, measured by GDP

GNI

Total amount of income received by a country both domestically (GDP) and via net incomes from overseas.

PPP (Purchasing power parities)

An economic metric that measures how many units of one country’s currency are needed to buy the same basket of goods and services as can be bought with a given amount of another currency.

Big Mac Index

An informal economic indicator created by The Economist that compares the purchasing power of different currencies using the price of a standard McDonald’s Big Mac as a benchmark, based on the theory of Purchasing Power Parity (PPP)

Easterlin Paradox

An economic concept stating that higher income increases happiness within a country at a given point in time, but long-term economic growth does not increase a nation's average happiness. It suggests that happiness relies on relative income and non-financial factors like work-life balance rather than absolute GDP growth.

Subjective happiness

a measure of how people feel about themselves.

Inflation

Sustained rise in the general price level (Target 2% ± 1%) Currently - 2,1%

Deflation

A sustained fall in the general price level - a sign of stagnation in an economy.

Disinflation

A fall in the rate at which the general price level is rising

Consumer Price Index (CPI)

A index number that measures the weighted average price level of a representative basket of goods and services consumed by households relative to a base year.

CPI = (Cost of basket in a current year/ cost of basket in a base year) x 100