2.1.1 Economic Growth

2.1.1 Economic Growth

The main measure of economic growth is the rate of change of real GDP. Indicators include: Unemployment, Inflation and the Balance of Payments.

Difference between:

Real and Nominal= They both adjust the GDP figure for inflation, however nominal GDP accounts for the prices of the goods/services at the current time, whereas real GDP accounts for the prices of final products over multiple years. As a result, nominal GDP will always be higher.

Value and Volume= Volume x Price = Value;

GNI (Gross National Income) is GDP plus income earned from citizens living abroad

The Government's Macroeconomic objectives are:

• Economic growth positive and stable
• Inflation low and stable
• Unemployment low
• Balance of payments (positive current account)
• Reduced inequality
• Balanced Government budget
• Sustainable use of environment

Limitations to GDP being the measure for growth

-GDP data may be inaccurate

-Doesn't include shadow economy

-Income is not everything

-Distribution of wealth

-Imbalances between consumption and investment

-Regional variations in income and spending

-Leisure and working hours and working conditions

-The value of non-marketed output

-Innovation and the development of new products

In 2017, it was estimated that the UK's shadow economy accounted for 9.4% of its GDP

National Happiness

-In 2013 the UN happiness report ranked the UK 22nd 

-Six factors which affect the happiness of a nation are:

1. Real GDP per capita
2. Generosity
3. Freedom from corruption
4. Healthy life expectancy
5. Dependancy on people
6. Perceived freedom to make life choices