The use of National Income Data

What is GNP

Gross National Product measures the size of an economy

GNP includes the product produced overseas by UK firms - this profit will flow back into the UK. However it does not include foreign firms who operate in the UK as this profit flows back to the foreign countries

What is national wealth

National wealth is all of a countries assets minus all of a countries liabilities

Does not include consumer goods

What is the relationship between national output, national income and national expenditure

They are all equal

How can national income data be gathered

Income method - Measures income received by labour and other FOP when producing goods and services

Output method - Measures the value of all of the goods and services produced by the economy

Expenditure method - Shows spending of these incomes on goods and services by consumers

Standard of living definition

Standard of living is how well off a person is

The level of comfort, materials goods and necessities available to a person or group

Factors affecting SoL

Standard of living factors include: income

Quality and availability of employment

Quality and availability of housing

Inflation rate

Tax rates

Government policy

Life expectancy / quality healthcare

Quality and availability of education

Affordable/ free access to healthcare

Limitations of using GDP per capita to measure SoL

ignores how income is distributed

doesn’t look at regional issues

Hard to collect data

The hidden economy (criminal world)

Free services - internet not accounted for

How is quality of life different to standard of living

Quality of life looks at safety, health, education, enjoyment, environment and leisure. ect.

What is the Easterlin paradox

Within a society rich people tend to be happier than poor people, easterlin believed this was because relative income weighs heavy on peoples minds

Rich societies tend to be less happy than poor societies though

So he concluded as countries grow richer they do not become happier and that life satisfaction only rise with real income until a certain point

How can two countries compare national income data using PPP

Convert GDP data into a common currency

Making an adjustment to reflect differences in the costs of the two countries products then this data can be expressed at purchasing power parity standard

The PPP dollar takes into account the cost of living in different countries

What is PPP

The purchasing power can inflate or deflate GDP per capita to give a more comparable stat for comparing living standards across countries

What is the big mac index

Calculates how many units of a local currency is needed to purchase a big mac

Is used to compare value of currencies