Theme 2
2.1 Measures of economic performance
2.1.1 Economic growth
GDP
Def: The total value of goods and services produced in the UK within a year
Gross National Income (GNI)
Def: The total value of goods and services produced in the UK within a
year with net property abroad
PPP
The price of one countries currency in terms of another when comparing
the price of a basket of good in terms of another country
Pros: easier to compare living standards between countries
Limitations:
1) Ignore non market transactions e.g. farmers, homeworking
2) Ignore inequality
3) Ignore quality of goods and services
4) Underestimate quality of life
5) Composite of spending e.g. could be on national defense no benefit at
the moment but occupy high GDP percentage
Factors for SR growth: (actual growth)
1) Expansionary policies + monetary policies
2) Supply side policies
Factors for LR growth: (potential growth) ****can be shown by PPF
1) Factors of production
A) Land
E.g. land restriction, discover new resources
B) Capital
E.g. decrease corporation tax, increase FDI, capital allowances,
technology
C) Labor
E.g. relax migration policy
D) Enterprise
, E.g. grants for R&D, training programmes
2.5.3 Trade (business) cycle
Peak/boom downturn slump recovery
Reason for recession (negative output gap):
COULD BE EVERYTHING ON C+I+G+X-M
2.1 Measures of economic performance
2.1.1 Economic growth
GDP
Def: The total value of goods and services produced in the UK within a year
Gross National Income (GNI)
Def: The total value of goods and services produced in the UK within a
year with net property abroad
PPP
The price of one countries currency in terms of another when comparing
the price of a basket of good in terms of another country
Pros: easier to compare living standards between countries
Limitations:
1) Ignore non market transactions e.g. farmers, homeworking
2) Ignore inequality
3) Ignore quality of goods and services
4) Underestimate quality of life
5) Composite of spending e.g. could be on national defense no benefit at
the moment but occupy high GDP percentage
Factors for SR growth: (actual growth)
1) Expansionary policies + monetary policies
2) Supply side policies
Factors for LR growth: (potential growth) ****can be shown by PPF
1) Factors of production
A) Land
E.g. land restriction, discover new resources
B) Capital
E.g. decrease corporation tax, increase FDI, capital allowances,
technology
C) Labor
E.g. relax migration policy
D) Enterprise
, E.g. grants for R&D, training programmes
2.5.3 Trade (business) cycle
Peak/boom downturn slump recovery
Reason for recession (negative output gap):
COULD BE EVERYTHING ON C+I+G+X-M
