Unit 3 - Macroeconomics
GNI vs. GDP: Which Better Measures Economic Well-Being?
Table of content
Measuring economic well-being- GDP vs. GNI
- GDP (Gross Domestic Product): Focuses on output produced inside the country.
- GNI (Gross National Income): Considers incomes earned by nationals of a country.
Example:Think of GDP as a big cake baked within a country. If it's baked there, it counts for GDP, regardless of who eats it! GNI, on the other hand, cares about who owns the recipe, so even if a cake is baked abroad, if the recipe is owned by someone in your country, it counts for GNI!
Adjustments and comparisons
- Use real figures to adjust for changing prices over time (not nominal).
- Divide by population for per capita income (It’s like slicing the cake evenly for everyone).
Pros and cons of per capita income
Pros
- More output = more access = better, right?
Cons
- Income Distribution: USA vs. Denmark - Same per capita, different inequality!
- Environmental Cost: India’s rising income vs. pollution (21 of 30 most polluted cities!).
- Leisure: 60 hours or 35 hours work weeks? Leisure matters!
- Wealth: A house or car contributes to well-being.
- Public Services: Health care and education quality.
- Disasters & Composition of Output: Gulf oil spill counts positively? Defense spending vs. development?
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Unit 3 - Macroeconomics
GNI vs. GDP: Which Better Measures Economic Well-Being?
Table of content
Measuring economic well-being- GDP vs. GNI
- GDP (Gross Domestic Product): Focuses on output produced inside the country.
- GNI (Gross National Income): Considers incomes earned by nationals of a country.
Example:Think of GDP as a big cake baked within a country. If it's baked there, it counts for GDP, regardless of who eats it! GNI, on the other hand, cares about who owns the recipe, so even if a cake is baked abroad, if the recipe is owned by someone in your country, it counts for GNI!
Adjustments and comparisons
- Use real figures to adjust for changing prices over time (not nominal).
- Divide by population for per capita income (It’s like slicing the cake evenly for everyone).
Pros and cons of per capita income
Pros
- More output = more access = better, right?
Cons
- Income Distribution: USA vs. Denmark - Same per capita, different inequality!
- Environmental Cost: India’s rising income vs. pollution (21 of 30 most polluted cities!).
- Leisure: 60 hours or 35 hours work weeks? Leisure matters!
- Wealth: A house or car contributes to well-being.
- Public Services: Health care and education quality.
- Disasters & Composition of Output: Gulf oil spill counts positively? Defense spending vs. development?
Unlock the Full Content!
Dive deeper and gain exclusive access to premium files of Economics SL. Subscribe now and get closer to that 45 🌟