Economics

Economics

1. Macro Economy

   • Econ growth(GDP)/Econ development(SOLs) S5L1
     • Econ growth: an increase in real national income of an economy a time period, usually on year. Econ development: the process of improving people's economic well-being and quality life.
     • Sustainability
       • The needs of the present can be met without imposing costs on future generations.
     • Actual growth(move within PPC curve) SR
       • the percentage annul increase in national output actually produces.
     • Potential growth(shift of PPC curve) LR
       • the percentage annul increase in the capacity of the economy to produce.
       • output gap
         • the difference between actual and potential output. Positive if actual>potential Negative if actual
     • business cycle
     • Factors leading to econ growth
       • 1.More FOPs 2.Higher efficiency of using these FOPs i.e. Natural resources; Investment; Rate of savings; Edu&Training; Labour productivity or labour participation rate; Tech improvement; Better institutions
     • Pros of econ growth
       • 1. More G&S available for people to enjoy 2. Higher income 3. HIgher tax revenue, better social welfare schemes 4. Rise in employment 5. Increase consumer and business confidence
     • Cons of econ growth
       • 1. Environmental damage 2. Current loss of consumer goods in exchange for more capital goods in the future 3. Increased working hours 4. Depletion of natural resources
   • Measuring National income S4L2
     • the total income for an economy
     • GDP(Gross Domestic Product)
       • the market value (nominal) of all final goods and services produced within a country in a given period of time.
     • GNI/GNP(Gross National Income/Product)
       • the total output produced by a country's citizens wherever they produce it. 英国人在中国赚的钱不算中国的GNP，但是中国人在英国赚的钱算GNP
       • GNP=GDP+net property income from abroad
         • Net property income from abroad: consists of the inflow of interest, profits and dividends into a country minus the outflow.
     • GNP-Depreciation=NI
       • Depreciation: a figure used to measure the fall in value of the capital stock of a country.
     • Indicators of living standards of economic development
       • Human Development Index(HDI)
         • a mean of measuring countries' economic and social development using life expectancy, years of schooling and GNI per capita
       • Measure of Economic Welfare(MEW)
         • starts with GDP but adds the value of leisure time and the amount of unpaid work in an economy and subtracts the value of environment damage caused by industrial production and consumption.
       • Multidimensional Poverty Index(MPI)
         • a measurement of poverty based on health, education and living standards
     • Problems of using GDP
       • When comparing NI within a country
         • 1.GDP understates NI because the value of non-traded output is not included 2.GDP figures understate NI because they do not include the black market activity 3.GDP ignores the distribution of income 4.GDP ignores leisure time and working hours 5.GDP ignores changes in life expectancy 6.GDP ignores the effects of externalities
       • When comparing living standards between countries
         • Difficult to convert real GDP into a common currency Use PPP
     • Kuznets curve
       • Kuznets curve is an inverted U-shaped curve with inequality or Gini coefficient on the y-axis and economic development, time or per-capita income on the x-axis

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