econ 2.1.1
GDP per capita - measures the economic output per person in a country
useful for understanding the average standard of living in a given nation
considers population size
GDP per capita = total GDP/population
GDP measures the total value of the output of an economy in a given time period
real vs nominal
real = adjusted for inflation
nominal = not adjusted for inflation
total vs per capita
total = sum of all in an economy
per capita = per person in an economy
value vs volume
volume = amount of goods/services
value = what the goods/services are worth
GNI = GDP + net primary income + net secondary income
Gross national income measures the income in a country
net primary income = wages, salary, foreign investments etc.
net secondary income = transfers of money between countries such as remittences from people working abroad to their families or international aid
purchasing power parity is the idea that items should cost the same in different countries, based on the exchange rate
PPP measures how many units of one country's currency are needed to buy the same basket of goods/services as can be bought with a given amount of another currency (big mac index)
living standard factors
a living wage can help to lift labour productivity
accessible and high quality public services
getting more people into properly paid work
better/affordable housing to rent and buy
improving human capital
wealth generated from successsful businesses
disposible income - the amount of money households have available for saving and spending after direct taxes and national insurance have been accounted for
why GDP is a flawed guide to living standards
doesn't include value of non-marketed output & unpaid work e.g. family care
rising real GDP may not be sustainable - risk of lost natural capital
need to consider changing working hours - work/life balance
defensive spending e.g. clearing up waste & pollution & crime prevention add to GDP but prevent welfare
ignores distribution of income and wealth
may not capture value of free services including digital economy
economic wellbeing - the overall quality of life and material prosperity enjoyed by households and individuals
national wellbeing survey measures happiness in UK
subjective happiness - the self reported happiness levels with one's life
The Easterlin Paradox concerns whether we are happier and more contented as our real living standards improve