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20 Cards in this Set
- Front
- Back
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4 Main objectives |
1. Strong economic growth 2. Keeping inflation low (2%) 3. Reducing unemployment (full employment) 4. Equilibrium in the balance of payments (imports and exports balanced) |
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Economic growth |
- measured by change in national output (goods and services produced in a county in one year) - measured as a percentage |
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2 ways economic growth can be measured |
1. Volume - adding up quantity of goods and services produced in one year
2. Value - calculating the value of all goods and services produced in one year |
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2 ways GDP can be measured |
1. Adding up the total amount of national expenditure in a year 2. Adding up the total amount of national income earned in a year |
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Nominal GDP |
money GDP not adjusted for inflation |
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Real GDP |
nominal GDP adjusted for inflation |
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Which three measures of economic growth should be equal? |
- GDP - GDI (income) - GDE (expenditure) |
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What is the rate of economic growth |
the speed at which the national output grows over a period of time |
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Formula to measure the rate of economic growth |
change in GDP/Original GDP x 100 |
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How to produce an index |
? |
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GDP per capita formula |
total GDP/population size |
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Limitations of GDP as a measure of standard of living |
1. Mean average 2. Excludes wealth 3. Purely economic 4. Hidden economy 5. Subsistence economy 6. Second had goods aren't included |
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1. Mean average |
- distortion by higher or lower values e.g. inequality - not adjusted from inflation |
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2. Excludes wealth |
- doesn't include assetts |
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3. Purely economic |
- doesn't take into account other contributing factors e.g. life expectancy |
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4. Hidden economy |
(anything that is traded without record) - not shown in statistics |
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5. Subsistence economy |
- entirely self providing - wherever work is done that is not paid for e.g. gardening |
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Purchasing power parity |
- when GDP per capita doesn't reflect true values - the real value of an amount of money in terms of what you can actually buy with it e.g. in a less developed county £1 will buy more than in a more developed country |
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Other measures of living standards |
- HDI - 3 equally weighted sections - health (life expectancy) - education (average years in school) - standard of living (GDP per capita) |
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Easterlin Paradox |
- named after Richard Easterlin - increases in GDP aren't always associated with happiness levels - when incomes are not sufficient to meet basic needs, increasing GDP leads to greater happiness but not in rich countries |
