Key Concepts in Economic Growth and Development

Economic Growth

An increase in real output or real GDP.

Real Income

Actual output. The total number of goods and services produced in a country.

Net Social Welfare

Measures economic factors (like output) and non-economic factors (like life expectancy and literacy rates etc).

HDI (human development index)

Is used to measure and compare a country's social and economic development with those of other countries. The HDI figure is a combination of health, education and income levels.

Productive Capacity

Measures potential output rather than actual output. (What you could produce if all resources were fully employed instead of current level of output)

GDP

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

Real GDP

The total value of goods and services produced measured in constant prices OR Nominal GDP adjusted for inflation.

Nominal GDP

The total value of goods and services produced measured in current market prices.

Social Indicators

These are quality of life factors. (Also called non-economic factors)

PPC

Production Possibility Curve. Shows maximum possible output combinations of two goods that a country can produce. Assumes technology and resources are fixed.

Investment

The creation of capital goods.

Production

Creating goods and services. It is done by firms.

Productivity

Output divided by input.

Opportunity Cost

The loss of the next most desired alternative.

Consumer Goods

Goods used by consumers.

Capital Goods

Goods used by producers to make other goods or services.

Injections

Flows of money back INTO the circular flow diagram

Withdrawals

Flows of money out of the circular flow diagram

Five Sector Model

Households, Firms, Financial institutions, Government and Overseas.

Positive Outcome

A good effect

Negative Outcome

An undesirable effect/impact

Environmental Impact

Something that affects the environment

Economic Effect

Something that affects the economy

Social Effect

Something that affects people

Real GDP per capita

Real GDP divided by the population. Tells you what each person earns/produces on average.