Gross Domestic

Product (GDP)
Learning Intention
Researching the relative effectiveness of economic
indicators for measuring growth in an economy

Success Criteria
I can accurately describe GDP and analyse and
communicate its positive and negative implications
for the measurement of economic growth
 An economic indicator is a piece of data used by
economists and Governments to measure whether an
economy is healthy and growing.

An economy needs to grow at a “sustainable rate” to meet

the needs of its population.
Economic
Indicators People need to buy goods and services, from food every
day, to seeing a doctor when their sick and maybe buying
a new car when the old one breaks down.

The economy also needs to meet the needs of population

growth and the changing life stages of the existing
population
There are a
 Gross Domestic Product (GDP)
variety of
Economic  Unemployment
Indicators, but we
will focus  Inflation (& the Consumer Price
on three Index)
Gross Domestic
Product (GDP)
Why is it important?
GDP
 GDP measures economic growth - the total value of all
goods and services produced in Australia over a period of
time and is given an AUD value
 The Australian Bureau of Statistics (ABS) measures GDP
quarterly (every three months) and publishes the data.
 This figure is compared to the previous quarterly figure and
the difference between them is expressed as a percentage
(%)
 Most Governments hope to see a 2%- 3% growth in GDP
annually
  As economic growth (measured by GDP)
increases, more goods and services are
produced, and more people are employed
What is the (and paid wages) to make them.
impact on the  These people can use their wages to go out
and buy the goods and services they need
population of and/or want (Consumption) hopefully
changes to improving their living standards.
economic  When economic growth decreases, less
goods and services are produced, less
growth? people are employed (and paid) and their
living standard decreases
What happens if growth slows down
or stops (contracts)?
If the growth slows down or stops
less goods and services are
produced, economic growth slows
down and therefore less people are
employed (wages are lowered).
Economic Recession & Depression (the
economy shrinks)
 If quarterly GDP figures record a negative figure for two
consecutive quarters (six months) economists describe the
economy as going into recession.
 If this trend continues over eight quarters (two years)
economists describe the downturn in economic growth as a
recession
 A recession can have extremely serious consequences for
the population. People become unemployed and their
standard of living and wellbeing collapses.
  What does GDP stand for
GDP stands for Gross Domestic Product
 Why do governments measure GDP?
Governments measure GDP because it gives
information about the size of the economy and how an
economy is performing. The growth rate of real GDP is
often used as an indicator of the general health of the
economy.
 What percentage increase in GDP is considered
Questions 2-3%
suitable for an economy?

 Give a definition of an Economic Recession?

A recession can be defined as a sustained period of
weak or negative growth in real GDP (output) due to a
decrease in employment and production of goods and
services.
 Give a definition of an Economic Depression?
Economic depression is economic decline – longer
lasting form of recession.
Impact of recession

Businesses cut production, decreasing goods and services available to the

population. This often leads to cutting the work force and higher
unemployment and a decrease in profit for the business.

Unemployment will reduce income levels and place stress on families as

they cut back on spending on activities, social outings and holidays.

Unemployed people often feel personal failure which can impact on them
and their families well being.

As the economy slows the Governments budget position also declines –

they have less money to spend on services and peoples’ standard of living
decreases
Limits to the effectiveness of GDP as an
accurate measure of growth
GDP doesn't capture everything that adds value to the economy. One example is
that caring for children is not included in GDP if carried out by their parents (but
it is by a paid childcare worker).
It does not calculate the environmental and social consequences of the
production of some goods and services – and the damage they might do
It does not tell us how evenly the national income is split across the population –
income may be concentrated in the hands of a small group.
GDP doesn't capture broader aspects of economic welfare of the nation's
population. If GDP rose by 2 per cent one year, but the population grew by 4 per
cent, then average GDP per person would have decreased.
GDP is an important measure but must be viewed as part of a wider selection of
data.
GDP per Capita – divide the annual GDP
by the country’s population
 Essentially, GDP per capita acts as a metric for
determining a country's economic output per each
person living there. Rich nations with smaller
populations tend to have higher per capita GDP. Once
you do the math, the wealth is spread among fewer
people, which raises a country's GDP.
 The fact that the GDP per capita divides a country's
economic output by its total population makes it a
good measurement of a country's standard of living,
especially since it tells you how prosperous a country
feels to each of its citizens
  Explain the consequences on the population
when there are two or more quarters of
negative growth in GDP?
 List at least three limitations in the use of
GDP as a measure of a nations progress.
 Find a definition for GDP per capita. Give a
reason why you think this measure could be a
Questions fairer way of measuring economic growth in a
country?
 How might producing more and more goods
and services each year affect our
environment?
 Explain why the pursuit of increasing
production could affect a citizen’s health and
welfare?
 ANSWERED IN NEXT SLIDE
Explain the consequences on the population when there are two or more quarters of
negative growth in GDP?
When an economy has two or more quarters of negative GDP growth, it's in a
recession. This leads to:
Job Loss: Unemployment rises as businesses cut costs.
Income Drop: People earn less, impacting their living standards.
Business Closures: Some companies shut down, especially smaller ones.
Less Spending: Consumers cut back on spending, causing a ripple effect.
Housing Market Decline: Property values drop, affecting homeowners.
List at least three limitations in the use of GDP as a measure of a nations progress.
1. GDP does not calculate the environmental and social consequences of the
production of goods and services and what damages they might cause to society.
2. GDP doesn’t tell us how evenly national income is split across the populations –
there might be a small group of people with high income, which is called
concentration
3. GDP does not calculate non-market transactions, for example if a mother is
taking care of there child at home that is not counted but if the mother pays
someone to babysit her child that if money going into the economy and therefore
calculated in the countries GDP.
Find a definition for GDP per capita. Give a reason why you think this measure could
be a fairer way of measuring economic growth in a country?
Definition – GDP per capita is a measure that calculates the country's economic
output that accounts for the number of people in the country or the country's
population. GDP per capita is calculated by dividing the country's GDP by the country's
total population.
This measure is a fairer way because it make everyone equal no matter their
spot/participation in economy

How might producing more and more goods and services each year affect our
environment?
By producing more goods and services each year more people are employed which
means there are more wages which means more people can buy goods and services
which then result in a healthy inline to our environment.

Explain why the pursuit of increasing production could affect a citizen’s health and
welfare?
Chasing higher production can harm citizens:
Work Stress: Pressure for more output can stress workers.
Longer Hours: Increased work hours impact health and life balance.
Unsafe Conditions: Safety may be neglected, leading to accidents.
Job Insecurity: Production focus may mean job cuts, causing anxiety.
Environmental Impact: Rapid growth harms the environment, risking health.
Australia’s economy has experienced steady economic growth between 2010 - 2022.
The graph shows an anomalous result – can you identify the time period and suggest
a reason for this unusual result?
Lowest and Highest GDP per Capita
Do you observe any correlation between the countries
with the lowest GDP and those with the highest?

Write a paragraph that discusses two shared factors in

each group.