11.1 Circular Flow and GDP Flashcards
1
Q
Gross Domestic Product
A
The total value of all final goods and services produced in a year within the country.
2
Q
What is not included in GDP?
A
- The value of intermediate goods like lumber and steel
- Repurchase of used goods
- Financial transactions (buying/selling bonds and stocks)
- Public and private transfer payments
- Underground economic activities
3
Q
How does GDP increase?
A
- Expenditures on natural disasters, deadly epidemics, war, crime, and other detriments to society
4
Q
National Income (NI)
A
The sum of income earned by the factors of production owned by a country’s citizens
5
Q
Personal Income (PI)
A
The money income received by households before personal income taxes are subtracted
6
Q
Disposable Income (DI)
A
Personal income minus personal income taxes
7
Q
What are the two primary methods for calculating GDP?
A
Expenditure approach and income approach
8
Q
Expenditure Approach
A
Adds up spending by households, firms, the government, and the rest of the world
9
Q
Expenditure Approach formula
A
GDP = C + I + G + (X - M)