1a.

One can define economic growth as the increase in the inflation-adjusted market value of
the goods and services produced by an economy over time.

b. current period divided by base period

c. Higher GDP suggests higher living standards, but higher economic growth may be at the cost
of increased pollution and congestion. This leads to a decline in living standards (poor health
from pollution, time wasted from congestion) therefore GDP overestimates living standards. 

d. If the currency is overvalued, imports will be cheaper, and therefore there will be a higher
quantity of imports. Exports will become uncompetitive, and therefore there will be a fall in the
quantity of exports. Spain experiences a overvalued exchange rate as it will tend to lead to a
current account deficit. Secondly, If spain inflation rises faster than our main competitors then it
will make spain exports less competitive and imports more competitive. This will lead to deficit
in the current account. 

e. The Human Development Index is a statistic composite index of life expectancy, education,
and per capita income indicators, which are used to rank countries into four tiers of human
development. Firstly, there is a widespread use of HDI to compare development levels and it
does reveal clear global patterns. Therefore, it will be easier to use for comparing between
countries. Secondly, HDI doesn’t only concentrate on economic development, and takes into
consideration that there are other, more social, ways to measure human development. This will
then gives a more accurate output as it measures from other factors.

f. Supply-side policies are government attempts to increase productivity and increase efficiency
in the economy. If successful, they will shift aggregate supply to the right and enable higher
economic growth in the long-run. Firstly, deregulation, this is when government reduces barriers
to entry or reduces some laws in order to increase entrepreneurship in the country. Therefore,
this will make the market more competitive and it will create jobs for the unemployed. As
people earn incomes they will then spend on goods and services which will lead to an increase in
aggregate demand as well as economic growth in the country. Secondly, increased education
and training, as better education will be provided for the citizens in the country it will then
improve labour productivity and this will lead to an increase in aggregate supply. Therefore, as
aggregate supply increases more people will be able to demand goods and services and this will
often lead to an economic growth as people spend more on goods and services.
1. Standard of living is the level of wealth, comforts and services available, generally applied to
a society or location, rather than to an individual. Standard of living is relevant because it is
considered to contribute to an individual's quality of life. There are several difficulties on
comparing living standards between countries, firstly, Purchasing Power Parity, it is
important to take into account different purchasing power parity’s as for example, in
Indonesia people earn incomes quite low, however living costs in Indonesia are most likely
to be much lower compared to UK or US. In Indonesia we got lower income, but we can still
buy a lot of things as it is cheaper compared to other developed countries. Therefore, it is
important to take these factors into consideration when comparing living standards
between countries.