UNIT 9
2 ways which the economy can be monitored
• Inflation rate
• Unemployment
• GDP (economic growth)
• Type of economy e.g. open economy
Nominal GDP: measuring GDP with current prices
Real GDP: measuring GDP without the effect of changing prices
Price index: Nominal GDP/ Real GDP X 100
Ways of calculating GDP
• The total value added produced by firms in domestic economy in a period of time
• Adding up total expenditures in the period
• Totalling the amount of income earned
Indicators
GDP: indicator of quantity of resources available
GNI: monitor the standard of living
When measuring quality of life:
GNI > GDP, reflects the incomes of residents more closely
Per capita= per head
Reasons for inaccuracies:
1. Inequality in income distribution
2. Reliability of data agencies
3. Some transactions go unrecorded-informal nature
4. Exchange rates- reflect government policies rather than relative purchasing power of
incomes
Is GNI a reasonable indicator of a country’s standard of living?
Social indicators:
• Education level
• Standards of health-medical resources
• Environmental factors
Measuring happiness
-Measure of Economic Welfare (William Nardhaus and James Tobin)
-GNH (Gross National Happiness)
2 ways which the economy can be monitored
• Inflation rate
• Unemployment
• GDP (economic growth)
• Type of economy e.g. open economy
Nominal GDP: measuring GDP with current prices
Real GDP: measuring GDP without the effect of changing prices
Price index: Nominal GDP/ Real GDP X 100
Ways of calculating GDP
• The total value added produced by firms in domestic economy in a period of time
• Adding up total expenditures in the period
• Totalling the amount of income earned
Indicators
GDP: indicator of quantity of resources available
GNI: monitor the standard of living
When measuring quality of life:
GNI > GDP, reflects the incomes of residents more closely
Per capita= per head
Reasons for inaccuracies:
1. Inequality in income distribution
2. Reliability of data agencies
3. Some transactions go unrecorded-informal nature
4. Exchange rates- reflect government policies rather than relative purchasing power of
incomes
Is GNI a reasonable indicator of a country’s standard of living?
Social indicators:
• Education level
• Standards of health-medical resources
• Environmental factors
Measuring happiness
-Measure of Economic Welfare (William Nardhaus and James Tobin)
-GNH (Gross National Happiness)
