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What are the key differences between GDP and GDP per capita?
GDP measures total production, while GDP per capita measures average production per person, making it a better indicator of living standards.
How do nominal GDP and real GDP differ?
Nominal GDP is measured in current prices, while real GDP is adjusted for inflation, providing a more accurate measure of economic growth.
What is GDP?
The total market value of all final goods and services produced within a country's borders in a specific time period.
What is GDP per capita?
GDP divided by the population; a measure of the average standard of living.
What is the shadow economy?
Unreported or illegal economic transactions not included in GDP.
What are externalities?
Costs or benefits not reflected in market prices and thus not in GDP.
What is the Human Development Index (HDI)?
A measure of well-being considering life expectancy, education, and income.
What is Nominal GDP?
GDP measured in current prices, without adjusting for inflation.
What is Real GDP?
GDP adjusted for inflation, providing a more accurate measure of economic growth.
Define Gini Coefficient.
A measure of income inequality, where 0 represents perfect equality and 1 represents perfect inequality.
How does a large population affect GDP as a measure of living standards?
A large population can make a high GDP misleading, as it's spread across more people, resulting in a lower GDP per capita and potentially lower living standards.
How does income inequality affect the interpretation of GDP per capita?
High income inequality means that a few individuals hold a disproportionate amount of the wealth, making GDP per capita a less accurate reflection of the typical person's living standard.
How does environmental pollution affect GDP?
While production that causes pollution increases GDP, the environmental damage and health costs are not subtracted, overstating economic well-being.
How does the shadow economy affect GDP?
The shadow economy's unreported transactions are excluded from GDP, understating the true level of economic activity.
Why is GDP per capita a better measure of living standards than GDP alone?
GDP per capita accounts for population size, providing a more accurate representation of the average person's access to goods and services.
How does corruption impact HDI, even with high GDP per capita?
Corruption can divert resources away from education and healthcare, lowering life expectancy and educational attainment, thus reducing HDI.
How does focusing solely on GDP mislead policy decisions?
If policymakers only look at GDP, they could miss critical issues like environmental degradation or income inequality, leading to unsustainable policies.
How does an increase of 5% in nominal GDP and a 2% increase in population affect GDP per capita?
GDP per capita increases by approximately 3%.