Measures of Economic Growth - Coggle Diagram
Measures of Economic Growth
This is the value of all final goods & services produced in an economy in a year.
The benefits of using GDP is that it is both a measure of growth and a measure of living standards.
The problems w/ using GDP as a measure of growth: double counting, informal activity & errors
The problems w/ using GDP as a measure of living standards: negative externalities, income inequality, output produced & other quality of life aspects.
This gives us the average measure of individual incomes in an economy.
The problems w/ using GDP/Capita as measure of growth: same issues as GDP, factor income abroad & significances of remittances & influence of FDI & repatriation of profit
GNI (per capita)
GNI= GDP + net factor income
Net Factor Income= income earned by domestics workers - income earned by foreign workers/firms who are operating at home
This is the total income generated by a country's factors of production regardless of where those factors of production are located.
This accounts for the environmental costs of production.
Green GDP= GDP-environmental costs
Problems w/ using Green GDP: GDP could fall dramatically & monetary value on environmental costs is difficult.
National Income Statistics are useful to a government as they provide a report card to see how their economy is doing/measure economic performance.
GDP, GDP/CAPITA, GNI(per capita) & Green GDP are all national income statistics.
They also as a measure of economic growth allow governments to see whether they are meeting their objective of economic growth.
They also allow governments to evaluate policy-whether policy in the past has been successful & increased economic growth OR policy which could be going forward to increase economic growth
They can also act as a very important measure of living standards.
They also allow for a comparison of the performance of any economy compared yo other economies in the world.