1. GDP – a measure of National Income
In the UK, we use GDP to measure National Income (some countries use another measure)
GDP = Gross Domestic Product (includes production of foreign countries on UK soil; doesn’t include UK companies abroad)

2. National Income
The value of the output of goods and services produced in an economy over a period of time
Increases in National Income mean that the economy has grown – economic growth!
It is assumed that a richer nation can have a more comfortable life, more leisure time, more choices, etc…

4. Put the top 10 in order of Size
Country
Size ($billion, 2013)
United States
16,800
China
9,240
Japan
4,902
Germany
3,635
France
2,735
United Kingdom
2,522
Brazil
2,246
Russian Federation
2,097
Italy
2,071
India
1,877
Australia
Brazil
China
Canada
France
Germany
India
Indonesia
Italy
Japan
Netherlands
Poland
Russia
Saudi Arabia
South Korea
Spain
Sweden
Switzerland
Thailand
Turkey
United Kingdom
United States

5. Total vs. Per Capita GDP
Per capita is ‘per person’ – total GDP of the country divided by the population

6. Three ways to calculate National Income
Remember the desert island?
Remember circular flow?
income = expenditure = output
We can measure any of these to calculate GDP

7. Can you calculate the total contribution to GDP here?
£1600
We have to be careful not to double count – we add ‘value added’ at each stage of production.
£95
£550

8. The UK economy has become increasingly based on producing services…

11. But there are some problems with using GDP as a measure of performance:
Some activity goes uncounted - things we do for ourselves or our friends without payment - activities intentionally hidden from gov’t (black market)
Doesn’t tell us the income of the normal citizen - most of GDP could be in the hands of a few very rich people - Even GDP per capita doesn’t reveal this difference
Difficult to compare countries - the basket of goods that your money will buy in each country may be very different, so different standards of living could exist for the same GDP figure

13. Is GDP all that? Happiness? Well-being? Easterlin paradox?
Relative versus absolute income?

16. To what extent does a wealthier population make for a happier population?