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.

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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
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3
Q

How does GDP increase?

A
  • Expenditures on natural disasters, deadly epidemics, war, crime, and other detriments to society
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4
Q

National Income (NI)

A

The sum of income earned by the factors of production owned by a country’s citizens

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5
Q

Personal Income (PI)

A

The money income received by households before personal income taxes are subtracted

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6
Q

Disposable Income (DI)

A

Personal income minus personal income taxes

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7
Q

What are the two primary methods for calculating GDP?

A

Expenditure approach and income approach

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8
Q

Expenditure Approach

A

Adds up spending by households, firms, the government, and the rest of the world

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9
Q

Expenditure Approach formula

A

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

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