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SOL AND MACRO INDICATORS - Coggle Diagram

- - - - Amount of G and S that individuals within the country have available for consumption from which they derive utility
    - - E.g. amount of leisure people consume, life expectancy, standard of education, absence of pollution (not related to qty of G and S)
  - - - total value of all final G and S newly produced within the geographical boundary of a country in a given year before allowance for depreciation
      - % change real GDP = % change nominal GDP + % change in prices in the economy
        
        % change in per capita GDP approc = % change in GDP - % change in population
    - - Sum of gross factor incomes receivable by resident units
      - GNI = GDP + net primary income from abroad
        
        useful indicator for economies with a lot of overseas-working resident units
        
        e.g. Philippines
    - - Composite index of: life expectancy at birth, mean years of schooling and expected years of schooling, SOL measured by GNI per capita
        
        Can be used for concluding paragraphs as a factor of comparison
    - - nominal : at current prices; prices prevailing in the market in the current year
      - Real: constant prices; prices that prevailed during some fixed period. This removes the price effect. Isolates quantity
    - - over time
        
        Real per capital GDP
        
        on average more G and S produced per head
        
        more needs and wants satisfied
        
        higher level of utility can be derived per member of population
        
        higher material SOL
        
        1 more item...
        
        why real instead of nominal
        
        rise in GDP could be due to rise in price rather than volume
        
        removes price effect
        
        measures only volume
        
        why per capita
        
        increase in GDP could be due to increase in population
        
        G and S each person has available may not have increased
        
        non-material
        
        NY increases
        
        increased tax revenue for govt
        
        social development
        
        1 more item...
        
        after certain level
        
        basic needs and wants are satisfied
        
        1 more item...
        
        expands opportunities, expression and self actualisation of citizens
        
        can pursue hobbies and passions
        
        LIMITATIONS
        
        income distribution not considered
        
        if only rich minority experiences increase
        
        masses little increase in income
        
        1 more item...
        
        does not distinguish type of output (where it went to)
        
        if increase is due to increase in production of capital goods/ govt military expenditure
        
        does not imply improvement
        
        fails to capture quality of G and S or availability of services that are available ree
        
        improvement in quality improves SOL but is not shown in figure
        
        more services made available for free provides value but cannot be properly accounted for
        
        inclusion of previously excluded productive activities
        
        prevelant from using real prices from the distant past
        
        improvement of data overtime
        
        comparisons using past data is more difficult and less accurate
        
        does not adequately reflect non-material aspect of SOL
        
        externalities as a result of activities leading to increase in GDP
        
        if increase is due to working longer hours, SOL may decrease
      - over space
        
        per capita GDP with PPP conversion
        
        per capita
        
        converting to common currency using PPP exchange rate
        
        account for differences in cost of living
        
        using market exchange rate, does not account that same amount of USD can purchase different amounts of G and S across countries
        
        Purchasing Power Parity (PPP) exchange rate better reflects differences in cost of living
        
        different countries have different degree of inequality in income distribution
        
        complemented with gini coefficient
        
        differ in composition of national output
        
        composition of consumer goods, capital goods or govt provision amenities
        
        differ in non-marketed activities and underground economy
        
        understate country's output
        
        potential for large variation
        
        1 more item...
        
        differ in data collection method, accuracy and reliability
        
        differ in non-material aspects of SOL derived from negative externalities
        
        non-material
- - - - (low) unemployment
        
        Unemployment rate
        
        unemployment: workers who are of legal working age who at willing and able to work at the current wage, actively seeking employment, but are unable to find work
        
        = no. of unemployed/ labour force × 100%
        
        labour force comprises of persons kf minimum legal working age, who are both willing and able to work at the current wage rate. Excludes people who are deemed unable to work (sick/handicapped) and those unwilling to work at the current wage rate (students)
        
        Employment rate
        
        = no. of employed persons/ working-age population * 100
        
        underemployment: labour is under-utilised
        
        working below their productive capacity
        
        e.g. time related: forced to work less because employers do not need their productive efforts (when they are willing and able to work full-time)
        
        Full employment: non-zero, low rate of unemployment that is compatible with price stability, when all willing and able to work have gained employment
        
        structural/frictional unemployment can still occur
        
        Labour force participation = labour force/working-age population * 100%
        
        labour productivity: real output generated per unit of labour input used
      - (favourable) Balance of Trade
        
        BOT, Exchange Rates
        
        BOT: measures difference between total value exports and import (X-M)
        
        Exchange rate: price in terms of other currencies
        
        increase in price of Currency A in terms of Currency B: Appreciation
        
        Decrease in price is described as depreciation
        
        Intepretation of Graph
        
        if exchange rate of currency A per other currency B increases, Currency A depreciated
      - (low) Inflation
        
        Consumer Price Index (CPI)
        
        inflation rate = ((CPI year x - CPI year x-1)/CPI year x-1 ) * 100%
        
        Inflation: increase in general price level (GPL)
        
        healthy economies: positive and stable rate of inflation, indicating expanding aggregate demand (AD)
        
        disinflation: decrease in rate of inflation
        
        deflation: decrease in GPL
      - National Income (Economic growth)
        
        National Income Statistics
        
        % change in real GDP over a time period
        
        necessary to remove price effect to isolate qty
        
        Actual vs Potential Growth
        
        Actual: Measure of increase in capacity of an economy to produce G and S
        
        compared from one period to another
        
        Potential: Capacity of an economy to produce G and S
        
        usually not realised
        
        Other growth concepts
        
        Sustained growth
        
        continuous growth over a period of time
        
        Sustainable growth
        
        growth w/o causing other significant economic problems
        
        particularly for future generations
        
        e.g. depletion of resources
        
        Inclusive growth
        
        growth that is sustained over a period of time
        
        broad-based across economic sectors, and creates productive employed opportunities for majority of the country's population
        
        recession: 2q of negative real GDP growth
    - - but does not always hold (at best weak positive relationship)