2019 Nov (GNI) Paper 1 HL

2019 Nov (GNI) Paper 1 HL

(3) (b) Discuss whether the real gross national income (GNI) per capita of a country is a good indicator of its standard of living.

 

Definition

 

GNI - GNI is the total amount of money earned by a nation's people and businesses. It is used to measure and track a nation's wealth from year to year. The number includes the nation's gross domestic product plus the income it receives from overseas sources.

(RGNI = GNI – Inflation)

 

GNI = GDP + Net Income from Abroad

RGNI Per Capita – RGNI/# of citizens in the country

Nominal vs Real = Nominal is not adjusted for inflation and is measured with current prices, which are the prevailing prices at the time of measurement. However prices change over time. If there was a 10% increase in NGNI, we cannot comprehend whether the increase in nominal GNI is brought upon by an increase in output or price level. To allow meaningful comparisons over time, GNI has to be measured in real terms as RGNI, where GNI is adjusted for inflation so the price level of goods and services are held constant.

RGNI per capita is a good indicator of a standard of living such as higher average incomes leading to higher consumption, greater tax revenue for public services, less poverty.

There are limitations of using RGNI per capita to measure the standard of living such as the lack of information about the distribution of income and the composition of output, measurement problems and non-income factors (leisure time, quality of environment) affecting the well-being of the population; considerations of alternative measures such as HDI and the “green GDP” per capita; considerations of the meaning of “a standard of living”.

The Lorenz curve is a way of showing the distribution of income (or wealth) within an economy. Max O. Lorenz developed it in 1905 for representing wealth distribution. The Lorenz curve shows the cumulative share of income from different sections of the population. The 45 degree line is an economy that has zero income inequality. The further the line is away from the 45 degree the more income inequality. Recognize that the Country Z is more unequal in income that Country X.

The Gini coefficient can then be thought of as the ratio of the area that lies between the line of equality and the Lorenz curve (marked A in the diagram over the total area under the line of equality

2014 Nov (GDP/CPI) Paper 3 HL

2014 Nov (GDP/CPI) Paper 3 HL

(a)  Explain the difference between GDP, green GDP and GNI.

 

 

Green GDP – is GDP adjusted for the effects of production on the environment.

 

GNI – GDP plus incomes earned/received from abroad minus incomes paid/sent abroad.

Or

GNI is a measure of incomes received by the residents of a country independent of the geographic location of factors of production involved.

 

GDP – is a measure of the value of output produced within the boundaries of an economy independent of the nationality of the factors of production involved.

(a)  Using the data in Table 1

(i)   Calculate the GDP of Country X for 2012.

GDP    = C       + I      + G     + (X-m)

278.4b = 125.6 + 33.9 + 89.1 + (78.5 – 48.7)

 

(ii) Calculate the GNI of Country X for 2012.

 

GNI = GDP + (factor income abroad – factor income paid abroad)

GNI      = GDP  + (factor income abroad – factor income paid abroad)

$285.7b = 278.4 + (296.6 – 22.3)

 

 

(c)  (i) Using the data in Table 2 calculate the level of real GDP for Country X for 2014 to 2016. Enter the results in table 2.

Real GDP = Nominal GDP/Deflator x 100

2014 Real GDP = 308.12/98.9 x 100 = 311.547 or 311.55

2015 Real GDP = 321.99/100 x 100 = 321.99 (the deflator is always 100 in the base year) Nominal = Real with (no inflation) there is no inflation in the base year.

2016 Real GDP = 332.65/102.2 x 100 = 325.489 or 325.49

 

Rate of Change Formula = (New – Old) / Old x 100

 

2015 Real Growth Rate is the change from 2014 to 2015

(321.99 – 311.55) / 311.55 x 100 = 3.35

 

2016 Real Growth Rate is the change from 2015 to 2016

(325.49 – 321.99) / 321.99 x 100 = 1.09

(ii) Outline the difference between nominal and real GDP.

 

Real GDP is nominal adjusted for inflation (changes in the average price level)

 

 

(d)  Calculate the annual growth rate for Country X for 2015 & 2016. Enter in Table 2.

 

Rate of Change Formula = (New – Old) / Old x 100

 

2015 Real Growth Rate is the change from 2014 to 2015

(321.99 – 311.55) / 311.55 x 100 = 3.35

 

2016 Real Growth Rate is the change from 2015 to 2016

(325.49 – 321.99) / 321.99 x 100 = 1.09

 

 

(e)  Using the data in Table 2 calculate the real GDP per capita for Country X for 2014 to 2016.

 

Real GDP (per capita) = RGDP/Population

 

2014 = 311,550,000,000/ 13,273,644 = 23,471

2015 = 321,990,000,000/ 13,340,012 = 24,137

2016 = 325,490,000,000/ 13,473,412 = 24,158

 

 

(f)   Identify which of the 3 letters (a, b, c) on the following business cycle diagram best describes the position of Country X in 2016.

 

Country X in 2016 is at Point A