Distinguish between GDP and GNP/GNI as measures of economic activity.
GDP is the monetary value of all goods and services produced in an economy.
GNP/GNI is the monetary value of all goods and services produced in an economy, including net factor inflow
from abroad.
Distinguish between the nominal value of GDP and the real value of GDP
The nominal value of GDP is simply the monetary value of GDP at the time of measurement, however its true
value is masked by inflation. Real GDP adjusts GDP for inflation between years, such that annual GDP figures
can be compared.
Distinguish between total GDP and GDP per capita
Total GDP is simply the complete total of GDP in an economy. GDP per capita is the total GDP, divided by the
population of the economy.
Examine the output approach, the income approach and the expenditure approach when measuring
national income.
Output approach:
- National income measured by calculating the monetary value of all final goods and services produced
in an economy during a year.
Income approach:
- National income measured by totalling all flows of income (wages, interest, profit, rent, etc).
Expenditure approach:
- National income measured as a flow of expenditure. GDP is the sum of private consumption
expenditure.
Evaluate the use of national income statistics, including their use for making comparisons over time
their use for making comparisons between countries and their use for making conclusions about
standards of living.
National income statistics are useful for seeing average wealth, but don’t she income equality. I.e. National
income per capita may be high, but the gini coefficient may be close to 1.
Evaluate the meaning and significance of green GDP.
Green GDP is simply GDP, but with an added factor that subtracts the cost of environmental degradation. It is
useful as it reflects sustainability of a country's economy.
Explain, using a business cycle diagrams, that economies typically tend to go through a cyclical
pattern characterized by the phases of the business cycle.
The business cycle describes overall trends in GDP.
Boom → Recession → Slump → Recovery
Boom: High demand and high production. Consumer confidence. Businesses invest and expand.
Recession: Output and labour costs reduced as incomes and demand fall. Unemployment high.
Explain the long-term growth trend in the business cycle diagram as the potential output of the
economy
In the long term, economies are always expected to expand in productive potential. This is because of
technology improvements and an expansion in the size of the labour force. Thus, regardless of the oscillations
in GDP of the business cycle, potential long-term growth rises.
Distinguish between a decrease in GDP and a decrease in GDP growth
A decrease in GDP is characterised by the value of Real GDP decreasing between years.
A decrease in GDP growth is a decrease in the rate at which GDP is growing each year.
Define Economic Growth
- An increase in Real GDP.
GDP is the monetary value of all goods and services produced in an economy.
GNP/GNI is the monetary value of all goods and services produced in an economy, including net factor inflow
from abroad.
Distinguish between the nominal value of GDP and the real value of GDP
The nominal value of GDP is simply the monetary value of GDP at the time of measurement, however its true
value is masked by inflation. Real GDP adjusts GDP for inflation between years, such that annual GDP figures
can be compared.
Distinguish between total GDP and GDP per capita
Total GDP is simply the complete total of GDP in an economy. GDP per capita is the total GDP, divided by the
population of the economy.
Examine the output approach, the income approach and the expenditure approach when measuring
national income.
Output approach:
- National income measured by calculating the monetary value of all final goods and services produced
in an economy during a year.
Income approach:
- National income measured by totalling all flows of income (wages, interest, profit, rent, etc).
Expenditure approach:
- National income measured as a flow of expenditure. GDP is the sum of private consumption
expenditure.
Evaluate the use of national income statistics, including their use for making comparisons over time
their use for making comparisons between countries and their use for making conclusions about
standards of living.
National income statistics are useful for seeing average wealth, but don’t she income equality. I.e. National
income per capita may be high, but the gini coefficient may be close to 1.
Evaluate the meaning and significance of green GDP.
Green GDP is simply GDP, but with an added factor that subtracts the cost of environmental degradation. It is
useful as it reflects sustainability of a country's economy.
Explain, using a business cycle diagrams, that economies typically tend to go through a cyclical
pattern characterized by the phases of the business cycle.
The business cycle describes overall trends in GDP.
Boom → Recession → Slump → Recovery
Boom: High demand and high production. Consumer confidence. Businesses invest and expand.
Recession: Output and labour costs reduced as incomes and demand fall. Unemployment high.
Explain the long-term growth trend in the business cycle diagram as the potential output of the
economy
In the long term, economies are always expected to expand in productive potential. This is because of
technology improvements and an expansion in the size of the labour force. Thus, regardless of the oscillations
in GDP of the business cycle, potential long-term growth rises.
Distinguish between a decrease in GDP and a decrease in GDP growth
A decrease in GDP is characterised by the value of Real GDP decreasing between years.
A decrease in GDP growth is a decrease in the rate at which GDP is growing each year.
Define Economic Growth
- An increase in Real GDP.
