3.1 - Measuring Economuc Activity & Illustrating it's variations Flashcards
Business Cycle’s four phases
an expansionary phase
a peak phase
a contractionary phase
a trough
Circular Flow of Income Diagram Analysis
Government: Government spending (G) is an injection and taxation (T) is a leakage
Financial sector: Investment (I) is an injection and savings (S) is a leakage
Foreign sector: Exports (X) is an injection and imports (M) is a leakage
Consumption
The expenditure by households on goods and services in the product market.
Economic Growth
When a country produces more goods and services in one period than in a previous one
It is usually measured by changes in the real GDP.
Gross Domestic Product(GDP)
Total monetary value of all final goods and services produced within an economy in a given period of time
GDP = I+C+G+(X-M)
GDP per capita = (Total GDP/Population)
Gross National Income (GNI)
This refers to the total income of a nation’s people and businesses.
GNI = GDP + Net exports
Gross National Product (GNP)
This refers to the total monetary value of all final goods and services produced by factors owned by the country’s citizens in a given period of time.
Injections in circular flow of income
The flows of money that come into the circular flow of income from outside
Injections = I+G+X
Leakages in circular flow of income
The flows of money that leave the economy
Leakages = S+T+M
Multinational Corporations (MNCs)
Companies that operate in many countries with a headquarters based in one to coordinate the global operation.
Nominal GDP
The value of all goods/services produced in an economy in a one-year period
GDP = C + I + G + (X-M)
Purchasing Power Parity (PPP)
Compares economic productivity and standards of living between countries on the basis of relative costs of goods and services.
Real GDP
Nominal GDP growth adjusted for inflation
Real GDP= (Nominal GDP/Price deflator)×100
