Measurements of Economic Growth

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  • Created by: Em
  • Created on: 30-05-16 09:34

Gross Domestic Product (GDP)

  • One of the primary indicators of economic growth
  • Measures the monetary value of all goods/services produced within a country's borders, in a specific time period (usually within a year but it can be every 3 months)
  • Can consider the population if it's GDP per capita (GDP divided by population size)
  • However the GDP doesn't say how the goods and services are distributed and it doesn't consider negative externalities (such as the environment or health)
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Measuring Standard of Living

Standard of Living

  • An amount of wealth, comfort, material goods and necessities that a particular individual, society or country has
  • Things that are included when measuring the standard of living
    • Education,
    • Infrastructure
    • Employment
    • Healthcare
    • The wealth of the country
    • The levels of debt in the country 
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Measuring Standard of Living

Quality of Life

  • A more subjective way of measuring the living standards in a country, usually measures intangible/non-material things (such as freedoms and rights of individuals)

Human Development Index (HDI)

  • Includes the GDP of a country, their literacy and numeracy levels (education), life expectancy and infant mortality rate (healthcare)
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Unemployment Rate

  • The unemployment rate excludes
    • People under 15 
    • People who are retired 
    • People with injuries preventing them from working
    • People who choose not to work
  • To get the unemployment rate as a percentage, you have to get the number of unemployed people divided by the total labour force, times by 100 
    • The labour force includes people over 15 who work at least 1 hour a week 
  • Unemployment happens when
    • Jobs are replaced by technology
    • Markets become uncompetitive
    • There is a decline in economic growth (recession - less money means less spending which results in a drop in profits for the business so they can't hire more people) 
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Unemployment Rate

Different types of unemployment

Cyclical Unemployment

  • When there aren't enough jobs for the number of people looking for work
  • Happens when national spending and production (GDP) are weak - recession

Natural Unemployment

  • The lowest rate of unemployment an economy can sustain over the long-term
  • Causes of natural unemployment:
    • Frictional unemployment (someone who is between jobs or looking for a job after being fired)
    • Structural unemployment (a change in how goods and services are produced e.g. the introduction of machines in an assembly line)
    • Seasonal unemployment (jobs are cut off at the sam time each year because of changes in the season e.g. farming)
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Inflation rate

  • An increase in a currency supply, relative to the number of people using it 
  • Usually results in a rise in the prices of goods/services 

Causes of Inflation

  • Cost-push inflation (an increase in the price of inputs like labour and raw materials)
  • Demand-pull inflation (an increase in the price of goods/services as supply can't meet demand)
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