booklet 1 - economic growth

what is GDP

the total value of national output of goods/ services produced given in a period.

what are the three ways of calculating GDP

output = expenditure = national income

what is economic growth

the increase in the real value of goods and services produced and is measured by the annual percentage change in real GDP

what is real gdp

reak GDP takes into account inflation

what is nominal GDP

the monetary value of the national output of goods and services measured at current prices

what is real gdp per capita

real income per head of population held at constant prices

what is real disposable income

income deducted after taxes + adjusted to the effects of inflation

What is PPP

purhcasing power parity - measures how many units of ones currency are needed to buy the same basket of goods and services as can be bought with the same amount of anothers currency

Big mac index - explain

the bigmac index is the US dollor price of a bigmac compared to see how under or overvalues the US dollar is.

what are the ways of measuting standard of living

real gni

what are the beneifts of using real gdp when assesing changes in living standards

easy to compare to different countries - contrasting high and low growth countries

living standars correlates to HDI

what is HDI

human development index - measures the level of real national income per capita with the data adjusted to Purcahsing power parity

what are the flaws when in measured gdp when comparing to living standards

• shadow economy - value of unpaid work

  • illegal activities

what is the distinction between economic growth and economic welfare

economic growth

• sustained growth of real gdp over a period of time

• contributes to standard of living through higher capita GDP/GNI

Economic welfare

• a broader measure of well being

• welfare may include changes in inequality and median household incomes

GNH - explain

Gross national happiness

Bhutan measures

• sustainable and equitable socio economic development

• environment conservation

• promotion of culture

• good governance

what is the relationship between real income and subjective hapiness

happiness involves emotion rather then material well being

what is the easterlin paradox

it concerns whether we are happier and more contented as our real living standards improve

as countries get richer, they dont inevitably become happier

Richard easterlin proposed that satisfaction does rise with income but to a point

beyond that marginal gain in happiness decreases