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Economics 2.1.1
Economics- Edexcel 2.1.1
| Question | Answer |
|---|---|
| GDP | gross domestic product |
| GDP definition | a measure of the total value of national output of goods and services produced in a given period |
| 3 ways of calculating GDP | Output = Expenditure = National Income |
| GDP expenditure | aggregate demand |
| GDP factor incomes | incomes for people in jobs and in self-employment from their wages and salaries + profits of private & public sector businesses + rental income from the ownership of land |
| GDP value of output | value added from each sector |
| examples of sectors | primary, construction, manufacturing, tertiary, quaternary |
| primary sector | farming, fishing, mining |
| tertiary sector | services, e.g. tourism and health |
| quaternary sector | business consultancy and research |
| value added | the increase in market value of goods or services during each stage of production or supply |
| value added equation | value of production – value of intermediate inputs used in supplying a good |
| lower value added industries | mass produced textile & foods, industrial farming, manufacturing assembly, contract cleaning services, food delivery services, security businesses |
| higher value added industries | information technology, renewable energy, precision energy, life sciences, aerospace, bio-technology, high class restaurants & hotels |
| tangible goods | physical things |
| de-industrialisation | process of social and economic change caused by the removal or reduction of industrial capacity or activity in a country or region |
| manufacturing | business of producing tangible goods in factories |
| industrial sector manages what? | mainly manufacturing and construction |
| services | accountancy, health and social care, hospitality, education, tourism |
| economic growth | increase in real value of goods and services produced, measured by the annual percentage change in real GDP |
| nominal GDP | monetary value of the national output of goods and services measured at current prices |
| real GDP | monetary value of the national output of goods and services adjusted for inflation and measured at constant prices |
| what happens when inflation is positive? | nominal GDP rises more quickly than real GDP |
| real GDP per capita | real income per head of population expressed at constant prices |
| real disposable income | income after deduction of taxes and benefits that is adjusted for the effects of inflation |
| GNI | gross national income |
| GNI equation | GDP + net property income from overseas |
| NPIO | net property income from overseas |
| HDI | human development index |
| HDI definition | a summary measure of average achievement in key dimensions of human development: a long and healthy life, being knowledgeable and having a decent standard of living |
| PPP | purchasing power parity |
| PPP definition | how many units of one country’s currency are needed to buy the same basket of goods and services as can be bought with a given amount of another currency |
| high relative cost of living PPP | downward adjustment to nation’s PPP-adjusted GNI per capita |
| low relative cost of living PPP | real purchasing power is higher, so there is rising PPP-adjusted per capita incomes |
| the Big Mac Index | compares the US dollar price of Big Macs across countries to assess how under/overvalued the local currency is against the US dollar |
| what does the Big Mac Index do? | indicates the purchasing power of an economy and allows comparison between countries(available everywhere and manufactured in standardised size, composition and quality) |
| main indicator for standard of living | real GNI per capita expressed at PPP |
| inclusive growth | economic growth that is distributed fairly across society and creates opportunities for all |
| benefits of using real GDP when assessing changes in living standards | easy comparisons over time with % rate of economic growth/easy comparisons over countries/correlates with other measures of living standards,e.g.HDI/higher income correlates with buying more goods & services |
| poorer countries per capita incomes and poverty rates | very low per capita incomes & high rates of absolute poverty |
| flaws in using real GDP when assessing changes in living standards | understates real national income per capita |
| why does real GDP understate real national income per capita? | presence and growth of the shadow economy and the value of unpaid work, e.g. volunteers or people caring for their family |
| shadow economy | transaction of goods or services not reported to the government and therefore beyond the reach of tax collectors and regulators |
| underground economy | shadow economy |
| informal economic activity makes up how much output and employment? | one third of output and more than two thirds of employment |
| non-marketed output | goods or services provided free of charge or at prices that are economically insignificant to another unit |
| economic well-being | people have their most basic survival needs met and have sustainable income and assets so they can prosper |
| subjective well-being | a person’s affective evaluations of his or her life |
| median income | income of the middle household if all are ranked from lowest to highest income household |
| Measure of progress in Bhutan | gross national happiness (GNH) |
| 4 main aspects of Bhutan’s GNH | sustainable socio-economic development, environmental conservation, preservation of national culture, good governance |
| 9 domains of Bhutan’s GNH to measure | psychological wellbeing, health, time-use, education, cultural diversity, good governance, community vitality, ecological diversity, living standards |
| Subjective happiness | self-reported levels of happiness with one’s life determined by questionnaires |
| Measuring subjective happiness | looks at emotions not material wellbeing |
| Explanation behind Easterlin paradox | within society, richer people(better living standards) are more happy and contented than those that are poor BUT as countries get richer, don’t always become happier(rises up to a point & after that marginal gain in happiness declines) |
| Who stated the easterlin paradox | richard easterlin |
| A reason for the easterlin paradox diminishing after a certain point | relative income weighs on people’s minds |
Created by:
jessharris
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