Macroeconomics Chapter 5: National Income

The study of how an entire economy functions, focusing on factors like overall price levels, national output, and employment.

The study of the efficient allocation of resources within specific markets, like the market for a good or service.

The process by which prices adjust to balance supply and demand, leading to an efficient allocation of resources.

Situations where the price mechanism fails to achieve an efficient allocation of resources.

Government actions aimed at improving the allocation of resources in cases of market inefficiencies.

Government policies aimed at achieving fairness and equity in the distribution of resources.

The total output of goods and services produced by an economy.

The number of people employed in an economy.

Using national income statistics to assess changes in a country's living standards over time.

The total value of all goods and services produced in a country, adjusted for inflation.

The total value of all goods and services produced in a country, without accounting for inflation.

A general increase in prices of goods and services in an economy over time.

The use of past data to analyze and understand current economic trends and make informed decisions.

The ability to accurately represent the true value of a variable or statistic, considering factors like inflation.

Comparing living standards across different countries using a common currency.

When comparing living standards over time, we need to consider factors beyond just economic output, like social well-being and environmental quality.

Data that is collected and analyzed to understand economic trends and performance.

The value of a country's goods and services produced in a year, adjusted for inflation.

The exchange rate between two currencies that equates the purchasing power of those currencies.

The official exchange rate between two currencies, set by the market or government intervention.

The fluctuation in the value of a currency due to speculation or government intervention.

The relative prices of traded goods between different countries.

The process of converting currencies into a common currency for international comparisons.

The use of computers to analyze and process data for international comparisons, enabling more accurate analysis.

Real GNI is adjusted for inflation, providing a more accurate measure of the value of goods and services produced.

Real GNI per capita considers both the total GNI and the size of the population, providing a better insight into individual well-being.

The difference between changes in real GNI and the general price level reflects how much the actual value of goods and services has changed.

Changes in real GNI per capita can be approximated by subtracting the percentage change in population size from the percentage change in Real GNI.

It measures the average availability of resources per person, but doesn't capture income inequality within the population.

The real GNI per capita offers a better reflection of living standards as it accounts for both the total output and the population size.

Changes in income distribution over time can affect the real GNI per capita but aren't explicitly measured by this indicator.

Measures a country's economic performance by calculating the total market value of all goods and services produced within a specific period.

A measure of a country's overall wellbeing and happiness, taking into account factors beyond just economic growth.

Refers to the quality of life enjoyed by individuals or a society. It is influenced by various factors such as income, healthcare, education, and environmental quality.

The ability to compare economic performance and living standards across different countries or regions.

The use of the GNH instead of GDP as a primary measure of societal progress. This shift highlights the importance of non-material factors in evaluating wellbeing.

The potential bias in data due to sampling limitations, which can affect the accuracy and reliability of results.

The subjective nature of happiness, which can be influenced by cultural and social factors, making it difficult to compare across countries.

PPP rates are currency exchange rates that account for differences in price levels between countries, making the purchasing power of different currencies equal.

PPP-adjusted GNI figures are calculated by converting GNI figures to a common currency using PPP rates, eliminating differences in purchasing power.

Using official exchange rates to compare GNI across countries can be misleading because it doesn't factor in differences in price levels across countries.

Different countries may have different qualities in similar products and services. This makes it challenging to accurately compare purchasing power.

Countries have different consumption patterns due to factors like climate and culture. This makes it challenging to create a consistent basket of goods for PPP comparisons.

Physical environments and social norms influence living standards and consumption patterns, making direct PPP comparisons challenging.

PPP-adjusted GNI provides a more accurate measure of economic well-being compared to GNI using official exchange rates because it considers the actual purchasing power of income in different countries.