econ

What are national income statistics used for?

To measure and compare the performance of economies, evaluate economic progress, and monitor living standards.

Name some examples of national income statistics.

Gross Domestic Product (GDP), Gross National Income (GNI), and their per capita equivalents.

What was a significant outcome of China’s GDP growth post-1970s?

Hundreds of millions were lifted out of absolute poverty.

Why is using nominal GDP problematic?

It does not account for inflation, which can make increases appear larger than they are.

What does real GDP adjust for?

Inflation.

What aspect of quality does GDP fail to capture?

Improvements in the quality of goods and services, particularly in technology.

What is the informal economy and how does it relate to GDP data?

It consists of unrecorded economic activities, which can distort GDP comparisons, especially in developing countries.

How does rapid industrial growth relate to environmental issues in China?

It has led to severe air and water pollution, impacting health outcomes despite rising incomes.

What does GDP per capita measure?

Average income per person in a country.

What was Luxembourg’s GDP per capita in 2023 compared to India’s?

Luxembourg: over USD 120,000; India: around USD 2,400.

What is the purpose of using GDP at Purchasing Power Parity (PPP)?

To adjust for cost-of-living differences between countries.

How can GDP per capita give a misleading picture of income distribution?

It does not account for income inequality within a country.

What does a high Gini coefficient indicate?

High levels of income inequality.

Name an example of a country with high GDP per capita but high inequality.

South Africa.

How does Qatar's GDP per capita reflect its labor conditions?

It is high, but migrant workers often face poor living and working conditions.

What is the Human Development Index (HDI)?

A broader indicator that combines GDP per capita, life expectancy, and education levels.

Why do policymakers need national income statistics?

To design fiscal and monetary policies.

What is a risk when only relying on GDP for policy making?

It may lead to misleading conclusions about living standards.

What is a potential consequence of GDP being used in isolation?

It may ignore environmental costs and improvements in quality of life.

What do policymakers need to do in light of GDP limitations?

Complement national income statistics with broader indicators.

What is a criticism of high GDP growth despite rising inequality?

It can lead to societal unrest and discontent.

What does the AD-AS model illustrate regarding the economy?

The relationship between aggregate demand and aggregate supply.

What do monetarists believe about long-run economic adjustments?

They believe that free markets are self-correcting and will return to full employment.

What do Keynesians argue regarding wage rigidity?

Wages are sticky downwards, preventing full employment without intervention.

What did the US experience during the recession of the early 1980s?

High unemployment followed by recovery as wages adjusted.

What historical example supports the Keynesian view?

The Great Depression, where high unemployment persisted until government spending increased.

What is the Phillips curve?

It shows an inverse relationship between inflation and unemployment in the short run.

What do policymakers face when attempting to control both inflation and unemployment?

A trade-off where increasing demand requires sacrificing control over inflation.

What is an essential feature of both monetary and fiscal policy?

Both aim to stimulate aggregate demand during recessions.

What is a liquidity trap?

A situation where interest rates are near zero and further cuts do not stimulate demand.

Which fiscal policy was implemented in response to the 2008 crisis?

The American Recovery and Reinvestment Act, a USD 831 billion stimulus package.

How did China respond to the global downturn in 2008?

By implementing a USD 586 billion stimulus focused on infrastructure.

What is a criticism of fiscal policy during a recession?

It can worsen budget deficits and debt levels.

What are the effects of monetary policy during a recession?

Increased liquidity and lower borrowing costs to stimulate investment.

What year did the Federal Reserve cut interest rates to near zero during the COVID-19 pandemic?

2020.

What did the European Central Bank do during the COVID-19 pandemic?

Expanded asset purchases to maintain credit flows.

What limitations does monetary policy face during deep recessions?

When interest rates are already low, it may not stimulate demand effectively.

What happens when monetary policy is overly expansionary?

It can lead to inflation or asset bubbles.

What is fiscal multiplier?

The economic impact resulting from an increase in government spending.

What did Japan's economy suffer from during the 1990s despite low-interest rates?

Persistent deflation and weak demand.

What did the fiscal policy in the 2008 crisis primarily achieve?

It helped stabilize the economy and restore demand.

How do policymakers combine fiscal and monetary policy?

By using fiscal stimulus to boost demand while ensuring low borrowing costs with accommodative monetary policy.

Which approach is often cited as most effective?

A coordinated approach using both fiscal stimulus and monetary easing.

What does the success of policies during the Great Depression illustrate?

The importance of government intervention in restoring growth.

What kind of approach do Scandinavian countries take towards growth and inequality?

High growth combined with significant income redistribution strategies.

How do real-world examples inform the discussion of economic policies?

They provide insights on the effectiveness and limitations of these policies in practice.

What does the presence of structural inequalities imply for economic growth?

It limits the ability to reach productive potential, hindering overall growth.

In what context is the role of inequality in economic growth complex?

Inequality may incentivize growth but excessive inequality can stifle it.

What long-term effects can rising inequality have on human capital?

It can reduce access to education and healthcare for lower-income individuals.

What is a risk associated with excessive borrowing during periods of low interest rates?

The potential creation of asset bubbles.

During which recent crisis did many governments utilize fiscal stimulus to combat the economic downturn?

COVID-19 pandemic.

What does the term 'absolute poverty' refer to?

The inability to meet basic needs for survival.

How does the World Bank define the poverty line?

Living on less than USD 2.15 per day.

What is a potential benefit of moderate income inequality?

It may incentivize hard work and innovation.

What can high levels of inequality lead to in society?

Political instability and social unrest.

What are two primary forms of government intervention to reduce poverty and inequality?

Investment in human capital and minimum wage policies.

How can investment in education affect workplace prospects?

It can improve skills and enhance employability.

What happened in Brazil as a result of Bolsa Família?

It reduced poverty significantly while promoting education and health.

What aspect of labor markets may limit the effectiveness of minimum wages?

The existence of a large informal sector.

How does wage stagnation affect overall economic demand?

It suppresses consumer spending, hindering growth.

What must accompany investment in human capital for it to be effective?

Policies ensuring equitable access to quality education and labor market opportunities.

What societal outcome can arise from insufficient attention to inequality in growth policies?

Sustained cycles of poverty and economic stagnation.

How did the implementation of minimum wages in South Africa impact workers?

It improved incomes for millions of low-wage workers.

What is one challenge faced by minimum wage policies in countries with high informal employment?

They may not benefit the majority of workers.

What is essential for translating growth into broad-based welfare gains?

Policies ensuring inclusivity, sustainability, and equity.

What do Scandinavian welfare states exemplify in terms of growth and equality?

The interplay between strong economic growth and effective redistribution.

What underscores the need for a balanced approach in economic policy?

Acknowledging the importance of both growth and income equality.