Economic Growth
Define economic growth.
Increase in real GDP over time.
What is real GDP?
GDP adjusted for inflation.
What does GNI include that GDP does not?
Net income from abroad.
What does PPP stand for?
Purchasing Power Parity.
Name one thing GDP does not measure.
Income inequality, quality of life, environment, etc.
State the formula for calculating the growth rate of GDP.
The formula for growth rate is: Growth Rate = [(GDP at Time 2 - GDP at Time 1) / GDP at Time 1] × 100.
What is GDP per capita?
GDP divided by the population.
If UK citizens earn large profits from overseas investments, what happens to the UK's GNI?
It increases.
Why do economists prefer PPP-adjusted GDP for comparing living standards?
It reflects actual buying power, not just exchange rates.
Why is household labor (e.g., childcare) not counted in GDP?
It’s unpaid work — no market transaction.
"In 2024, many countries experienced low GDP growth but high inflation ('stagflation'). Explain why GDP alone is not enough to judge economic success during such periods."
Because rising prices (inflation) reduce purchasing power, and stagnant GDP means living standards may be falling — real income, inequality, and wellbeing indicators are needed too.
A country’s nominal GDP rose by 10% but inflation was 8%. What happened to its real GDP?
Real GDP rose only slightly (about 2%).
Which would likely be higher for a country with lots of citizens working abroad: GDP or GNI?
GNI.
In 2023, the Big Mac Index showed a cheaper Big Mac in the UK than the USA. What does this suggest under PPP?
The British pound has stronger purchasing power locally.
Two countries have the same GDP per capita. One has free healthcare and education; the other doesn't. Why might real living standards differ?
Public services improve wellbeing beyond income levels.
Why might an economy experience negative growth? Give one real-world reason.
Recession, war (e.g., Ukraine), pandemic (e.g., COVID-19).
In a country facing hyperinflation, why is nominal GDP not a good measure of true economic performance?
Inflation exaggerates nominal GDP growth.
Japan’s GNI is lower than its GDP. What could cause this?
More income leaves Japan (foreign investors) than comes in.
If a country’s market exchange rate shows high GDP, but PPP-adjusted GDP is lower, what does this imply?
Goods are expensive domestically; market rate overstates wealth.
The 2023 Turkey earthquake destroyed infrastructure. Why might this cause GDP to temporarily rise afterward?
Reconstruction boosts spending, but it does not improve real wellbeing.
The UK narrowly avoided recession in 2023. Suggest two government policies to stimulate stronger growth.
Increase public investment; lower interest rates; tax cuts.
Venezuela’s nominal GDP rose sharply during hyperinflation. How would an economist properly assess real economic activity?
By using real GDP that removes the effects of inflation.
The Philippines' GNI is boosted by remittances from workers abroad. How could this affect national economic policies?
The government might rely on remittances instead of building domestic industries.
After COVID-19, many emerging economies' PPP GDP shrank less than rich economies' market GDP. Why?
Local price levels were more stable; domestic markets less globally exposed.
Green GDP attempts to account for environmental costs. Suggest one real-world reason why this matters.
Growth that damages the climate (e.g., rising emissions in China) lowers sustainability.