Economic Growth

T2 CC3 (keywords)

Gross Domestic Product (GDP)

The value of the output of all goods and services produced within a country over a period of time.

Gross National Income (GNI)

GDP + income residents have received from abroad (in the form of interest, rent, profits or dividends) - income leaving the country, i.e. GNI = GDP + net income from abroad.

Real GDP per capita

Nominal GDP adjusted for inflation per head of the population.

Economic Growth

Capacity of an economy to produce more goods and services compared to a previous period. Usually measured as a percentage change in Real GDP.

Recession

A decline in GDP for two successive quarters.

Purchasing power parity (PPP)

The rate at which the currency of one country would have to be converted into that of another country to buy the same amount of goods and services in each country.

Standard of living

A measure of the level of economic prosperity, well-being, and “comfort” available to a person or a population.

Shadow economy

All economic activity that is unrecorded and untaxed by the government.

Mean

An average, that summarises the typical value of a set of data. Total divided by number of data points.

Median

The middle value in a sample sorted into ascending order.

Kuznets curve

Model that suggests inequality gap will narrow as a county becomes more developed.

Trade cycle

Shows how GDP changes over time.

Boom

Rapid GDP growth

Output gap

Occurs if there is a difference between actual and potential output in an economy.

Negative output gap

When GDP falls below its potential level leaving spare capacity in the economy.

Positive output gap

When GDP is above potential output or when nominal GDP continues to grow (driven by rising AD) when the economy is at full capacity.

National wellbeing and happiness

A multi-dimensional measure of how people feel about their lives, encompassing health, relationships, environment, and financial security. As well as a measure of satisfaction or “utility” experienced by individuals.

Easterlin paradox

The idea that happiness depends on relative income and wealth rather than absolute income and wealth.