CORE Unit 1

How do you calculate Real GDP growth rate between two given consecutive years?

(Final GDP- Initial GDP)/ Initial GDP

MCQ 1.2: The GDP per capita of Greece was $22,494 in 2012 and $21,966 in 2013. Based on these figures, the growth rate of GDP between 2012 and 2013 (to two decimal places) was: a) -2.40% b) 2.35% c) -2.35% d) -0.24% (actually calculate this, don't just guess and remember)

-2.35%

Which of the following variables have followed the so-called 'hockey-stick' trajectory—that is, little to no growth for most of history followed by a sudden and sharp change to a positive growth rate? a) GDP per capita b) labour productivity c) inequality d) atmospheric CO2 (More than one answer)

-GDP per capita -labour productivity -atmospheric CO2

What does disposable income leave out?

-The quality of our social and physical environment such as friendships and clean air. -The amount of free time we have to relax or spend time with friends and family. -Goods and services that we do not buy, such as healthcare and education, if they are provided by a government. -Goods and services that are produced within the household, such as meals or childcare (predominantly provided by women).

Which of the following are examples of private property? a) computers belonging to your college b) a farmer's land in Soviet Russia c) shares in a company d) a worker's skills

-computers belonging to your college -shares in a company

A ratio to measure inequality

90/10 ratio: the average income of the richest 10% divided by the average income of the poorest 10%.

firm

A business organization which pays wages and salaries to employ people, and purchases inputs, to produce and market goods and services with the intention of making a profit. [

technological progress

A change in technology that reduces the amount of resources (labour, machines, land, energy, time) required to produce a given amount of the output.

causality

A direction from cause to effect, establishing that a change in one variable produces a change in another. While a correlation is simply an assessment that two things have moved together, causation implies a mechanism accounting for the association, and is therefore a more restrictive concept.

monopoly

A firm that is the only seller of a product without close substitutes. Also refers to a market with only one seller.

developmental state

A government that takes a leading role in promoting the process of economic development through its public investments, subsidies of particular industries, education and other public policies.

market

A market is a way of connecting people who may mutually benefit by exchanging goods or services through a process of buying and selling.

gross domestic product (GDP or Y)

A measure of the market value of the output of the economy in a given period.

comparative advantage

A person or country has comparative advantage in the production of a particular good, if the cost of producing an additional unit of that good relative to the cost of producing another good is lower than another person or country's cost to produce the same two goods.

absolute advantage

A person or country has this in the production of a good if the inputs it uses to produce this good are less than in some other person or country.

political system

A political system determines how governments will be selected, and how those governments will make and implement decisions that affect all or most members of a population.

democracy

A political system, that ideally gives equal political power to all citizens, defined by individual rights such as freedom of speech, assembly, and the press; fair elections in which virtually all adults are eligible to vote; and in which the government leaves office if it loses.

technology

A process taking a set of materials and other inputs, including the work of people and machines, to produce an output.

demographic transition

A slowdown in population growth as a fall in death rate is more than balanced by a fall in birth rates.

purchasing power parity (PPP)

A statistical correction allowing comparisons of the amount of goods people can buy in different countries that have different currencies.

Industrial Revolution

A wave of technological advances and organizational changes starting in Britain in the eighteenth century, which transformed an agrarian and craft-based economy into a commercial and industrial economy.

capitalism

An economic system in which private property, markets, and firms play an important role (this is CORE's definition but it's shit so I'll give you a better one): a country's trade and industry are controlled by private owners for profit, rather than by the state.

How has capitalism lead to growth in living standards?

Capitalism enhanced: 1. Technology 2. Specialization These two factors increase productivity which increases living standard

Why is GDP and GDP per capita though to be a good measure of living standard?

GDP includes the goods and services produced by the government, such as schooling, national defense, and law enforcement. They contribute to wellbeing but are not included in disposable income. In this respect, GDP per capita is a better measure of living standards than disposable income.

Does a lower 90/10 ratio mean more inequality or equality?

If the ratio number is lower, the country is more EQUAL in terms on income distribution.

labour market

In this market, employers offer wages to individuals who may agree to work under their direction. Economists say that employers are on the demand side of this market, while employees are on the supply side.

disposable income

Income available after paying taxes and receiving transfers from the government.

What is the purpose of having Nominal GDP?

It estimates the basic market value of a given year and can be used to compare countries

What is the purpose of having Real GDP?

It shows the growth rate of the economy, because the constant prices means you only have to focus on the quantity of the goods that are sold

How has income inequality changed over time?

Over the past couple decades income distribution has become more unequal. China is an example of a country with a large income disparity.

constant prices

Prices corrected for increases in prices (inflation) or decreases in prices (deflation) so that a unit of currency represents the same buying power in different periods of time.

capitalist revolution

Rapid improvements in technology combined with the emergence of a new economic system.

too big to fail

Said to be a characteristic of large banks, whose central importance in the economy ensures they will be saved by the government if they are in financial difficulty. The bank thus does not bear all the costs of its activities and is therefore likely to take bigger risks.

What was Malthus' view of the world in the 1700's?

The Malthusian Theory of Population: a theory of exponential population growth and arithmetic food supply growth; basically the human population is growing faster than the food supply so eventually we will run out of that resource.

income

The amount of profit, interest, rent, labour earnings, and other payments (including transfers from the government) received, net of taxes paid, measured over a period of time such as a year. The maximum amount that you could consume and leave your wealth unchanged.

capital goods

The equipment, buildings, raw materials, and other inputs used in producing goods and services, including where applicable any patents or other intellectual property that is used.

economics

The study of how people interact with each other and with their natural surroundings in providing their livelihoods, and how this changes over time.

economic system

The institutions that organize the production and distribution of goods and services in an entire economy.

institution

The laws and social customs governing the way people interact in society.

private property

The right and expectation that one can enjoy one's possessions in ways of one's own choosing, exclude others from their use, and dispose of them by gift or sale to others who then become their owners.

ownership

The right to use and exclude others from the use of something, and the right to sell the thing that is owned.

demand side

The side of a market on which those participating are offering money in return for some other good or service (for example, those purchasing bread).

supply side

The side of a market on which those participating are offering something in return for money (for example, those selling bread).

economies of scale

These occur when doubling all of the inputs to a production process more than doubles the output. The shape of a firm's long-run average cost curve depends both on returns to scale in production and the effect of scale on the prices it pays for its inputs.

How can specialization and trade benefit individual consumers in a capitalist economy

When a producer specializes, they can produce more of a product and trade their surplus to get other products

GDP per capita

a measure of the total goods and services produced in a country which is then divided by the country's population. it is used to measure living standards, it is basically the average income per person.

centrally planned economy

an economy in which the government decides how economic resources will be allocated (ex: Soviet Union)

High GDP per capita =

higher living standards

Does the political system of a country play a role in the success or not of it economic system?

in virtually every modern capitalist economy, governments are a large part of the economy. governments can: -control competition by creating monopolies -provide essential goods and services such as physical infrastructure, education and national defense -support the institution of the capitalist economic system by bailing out major firms

Why is disposable income thought to be a good measure of living standards?

it is the maximum amount of food, housing, clothing and other goods and services that the person can buy without having to borrow—that is, without going into debt or selling possessions.

What was Adam Smith's view of the world in the 1700's?

prosperity arises from the pursuit of self-interest under free market conditions; he is also known for 'the invisible hand' which is the unobservable market force that helps the demand and supply of goods in a free market to reach equilibrium

Why are government services difficult to value?

the goods and services produced by government are typically not sold, and the only measure of their value to us is how much it cost to produce them.

Real GDP

the production of goods and services valued at constant prices/ GDP adjusted for inflation. It uses a base year to determine prices and uses those prices for calculating the GDP of subsequent years

MCQ 1.1: What does UK GDP per capita measure? a) the total output of London's economy b) the average disposable income of a UK resident c) the total output of the UK residents, divided by the number of the residents d) the total output of the UK's economy, divided by the country's population

the total output of the UK's economy, divided by the country's population

Nominal GDP

the value of final goods and services evaluated at current-year prices. it's calculated by (price of good) x (quantity of good sold)+.....