2.1.1 Economic Growth

Economic Growth

The rate of change of output- happens when GDP increases in value

GDP

Gross Domestic Product- The total value of goods and services produced in a country within a year

GDP per capita

The total GDP divided by the population number

Real GDP

GDP adjusted for inflation- the volume of national income

Nominal GDP

GDP disregarding the effects of inflation- the value of national income

GNI

Gross National Income- The value of goods and services produced by a country over a period of time plus net overseas interest payments and dividends

GNP

Gross National Product- The value of goods and services over a period of time through labour or property supplied by citizens of a country both domestically and overseas

Purchasing Power Parities

An exchange rate of one currency for another which compares how much a typical basket of goods in the country costs compared to one in another country- used to compare cost of living internationally

Problems with GDP for living standard comparison

-Doesn’t indicate distribution of income (GDP per capita does)

-Needs to be recalculated in terms of purchasing power

-Doesn’t account for hidden economies

-Doesn’t indicate welfare

Relationship between real incomes and subjective happiness

Real incomes often positively correlate with subjective happiness to a certain extent , as higher income levels can lead to improved living standards and access to resources. Only occurs up until basic needs are met