This document discusses several economic indicators used to measure economic output and standards of living, including GDP, real GDP, GNP, per capita GDP, and net factor income. It explains how each indicator is defined and calculated. It also examines some limitations of using GDP to measure economic well-being, such as failing to account for environmental costs, income inequality, and changes in leisure time. The document provides examples to illustrate these limitations from countries around the world. It concludes with a statistics diagram comparing GDP and other economic indicators for several countries.

1. By Katie O’Driscoll & Olivia Burke

3. A
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GDP
Real GDP
GNP
Per Capita GDP
Net Factor Income
B
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(i) The limitations of using GDP showing how well off economies are.
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(ii) Irelands black economy and the economic effects.
C
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Statistic diagram

4. 
Gross Domestic Product (GDP) is a measurement of
economic wealth, that is the value of total output of
goods and services in the economy
Source; Economics by David Begg, Stanley Fischer, Rudiger Dornbusch

6. Real GDP adjusts or accounts for changes in price or inflation
level. Adjusting GDP for changes in price(using GDP deflator)
gives a more accurate reflection of real trends in economic
wealth.
 Real GDP is sometimes called "constant" GDP because it is
expressed in terms of constant prices

http://en.wikipedia.org
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E.g. in Wonderland in 2005, nominal GDP is €100 bn. However,
due to an increase in the level of prices from 2000 (the base
year) to 2005, real GDP is actually €160 bn. The lower real GDP
reflects the price changes or inflation while nominal GDP does
not.

8. GNP- GNP is the output produced by factors of
production owned by residents of a country.
 Countries that have enterprises owned by foreign
individuals or companies for example Japan own car
plants in Britain. The profits made by such a car plant
as Nissan in Britain are included in Britain’s GDP but
part of the profits are sent back to Japan and those
profits are included in the Japanese GNP. GNP is a
better indicator of living standards and GDP is a better
indicator of productive activity.
Dobson , Palfreman, S.D , S.P, 1999. Introduction to
Economics. 1st ed. Oxford: Oxford University Press.


10.  Useful
when comparing one country to
another, as it shows the relative performance
of countries
www.investopedia.com
 A rising trend in this measure is a sign of
growth in the economy & increases in
productivity

11. Net foreign factor income (NFFI) captures the net flow of
income payments between the domestic economy and
the foreign sector. As such it separates Gross National
Product and Gross Domestic Product.
 The two components of net foreign factor income are (1)
foreign payments to domestic citizens and (2) domestic
payments to foreign citizens.
www.Amosweb.com
 Factor incomes sent home such as wages earned by Irish
people and rents earned by Aer Lingus on aircraft rented to
foreign airlines amounts to + 60. It is positive because it is
money coming into the country and adding to the GDP.


12. The increase in GDP may have been generated at a
huge cost to the environment, which may require
reconstruction( factories and buildings are now
subject to stricter environmental regulations) which
will impact negatively on the economy in the short
term.
 By products of production such as pollution and toxic
waste are not deducted from GDP as a cost to society.
Therefore GDP overstates the environmental well
being of a nation.


13. 
If GDP in country B has increased by 10 % over the
past 5 years but the growth in population in the
country has grown by more than 10% then the average
standard of living had actually fallen in terms of lower
GDP per head.

In an African country in 2009, GDP increased by 50%.
The population doubled(+100%) in the same year. A
family of 2 in this country had GDP per person of €100,
or total GDP = €200. So the family of 4 now has GDP
per person of €75, or total GDP = €300

14.  In
country A GDP has risen 10% over the past 5
years but inflation is up 15% over the same
period. So the standard of living over the 5
years has actually fallen and not risen.
 In
the Irish economy inflation is not a current
problem and will not cause GDP figures to be
misinterpreted.

15. GDP figures on their own do not show the distribution
of income and the uneven spread of financial wealth.
 Incomes and earnings may be very unequally
distributed among the population and rising national
prosperity can still be accompanied by rising relative
poverty.


16. 
Example – The poverty trap means that families with
lower incomes feel they cannot take higher pays or
better jobs as they feel they will loose there benefits
such as free childcare , healthcare, entitled to other
benefits. It’s a loose, loose situation.

Example - The total income of all men in the world is
more than double that of all women in the world. In
every region men earn more than women do. The
greatest income inequality between men and women
is in Southern Asia where men earn five times more
than women on average. (Global Fianace)

17. We need to analyse the balance between consumption
and investment.
 If an economy devotes too many resources to
satisfying the short run needs & wants of consumers.
Eventually there will be insufficient resources for
investment needed for long term economic
development.
 Faster economic growth might improve living standards
today but lead to an over-exploitation of scarce finite
such as oil, Gas.
 Limiting future growth prospects.


Example- Saudi Arabia has the highest consumption of
oil in the world, as it will last for many more years the
saudi’s are exploiting the oil for there own benefit
creating huge wealth.

18. 
Rising national output might have been achieved at the
expense of leisure time if workers are working longer hours.

E.G. A report released in August 1999, entitled Six Days A
Week, claimed that more than a million managers and
656,000 professionals in the UK worked at least 48 hours a
week. The study showed that the number of people
working more than 48 hours a week has risen from 2.7
million to four million over the past 15 years.

E.G. British workers have the longest working week in
Europe, with full-time workers putting in an average of 44
hours - three and a half hours longer than the European
average

19. 
The Black economy or underground economy is a
marketplace where goods and services trade without
paying tax. i.e. tax is not declared for work done.
Economic Effects:
 Irish Government suffers a loss of tax revenue which
impacts negatively on the finances of the government
for running the country
 Irish Companies both large and small that operate in
the tax system are at a competitive cost disadvantage
in terms of wages and benefits. This threatens jobs.

20. IRELAND
UK
USA
CANADA
$
210.3
Billon
45,835.75
0.9%
$
2.435
trillion
38,514.46
0.3%
$
15.68
Trillion
49,965.27
2.2 %
$
1.821
trillion
52,218.99
1.7 %
13.3%
7.7 %
7.3%
0.2%
2012
EASTERN
EUROPEAN
bulgaria
$
51.03 billion
470.22
8.5 %
ASIAN
COUNTRY
Japan
$
5.96
trillion
46,720.36
1.9%
7.1 %
17.5 %
4.1 %
12.90 %
2.7 %
1.5 %
1.1 %
10.6 %
0.8%
-0.70%
2
TOTAL GDP
GDP PER CAPITA
GDP GROWTH
RATE (MOST
RECENT)
UNEMPLOYMENT
INFLATION
UNHDI
RANKING
(MOST RECENT)
7
26
3
11
AFRICAN
COUNTRY
Ethopia
$
43.13 billion
173
10
6,986.04
0.8 %
57

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Economics by David Begg, Stanley Fischer, Rudiger Dornbusch. 5th ed.
Year 1997.
Department of Finance, Central Bank
Dobson , Palfreman, S.D , S.P, 1999. Introduction to Economics. 1st ed.
Oxford: Oxford University Press.
Modern Economics Leaving Certificate by Keith Spencer & Daniel
McCarthy. 3rd ed. Revised 2004.
En.wikepia.org
Eurostat (stats office)
Institute Notes
scoilnet.ie. 2013. Net factor income. [ONLINE] Available at:
http://test.scoilnet.ie/Res/charlieotoole020899150539_2.htm.
www.Amosweb.com
www.businessdictionary.com
www.esri.ie
www.investopedia.com
Welkerswikinomics.wikifoundry.com
http://www.tutor2u.net/economics/content/topics/livingstandards/limit
ations_of_gdp.htm.

23. Moodleshare.org
 thecollegevoice.org
 Studyingeconomics.ac.uk
