6 - test 2 begins Flashcards
What is the definition of GDP?
Market value of final goods and services produced in a country during a period of time.
Does GDP include intermediate goods? Why or why not?
No, they are counted in the final producted
What are the components of GDP?
C+I+G+NX
C
Consumption: spending by households (not new houses)
Durable, nondurable, services
I
Investment: spending by firms
new factories/buildings(business fixed investment), additions to inventories, new houses(residential investment)
G
Government: spending by federal, state, and local governments
Teachers, highways, aircraft
Not transfer payments
NX
Net eXports: exportsminus the value of imports
Sold by Americans - Sold by foreigners
What is the largest component of GDP?
Consumption
About how large is the U.S. economy (nominal basis)
26.9 trillion
What are some of the shortcomings of GDP?
Doesn’t include household production
Doesn’t include underground economy (black market)
What is nominal GDP?
Current dollars not adjusted for inflation
What is real GDP?
Constant dollars inflation adjusted, chain-weighted dollars
What is the GDP deflator?
price index used to measure inflation
nominalgdp/realgdp*100
How is real GDP calculated?
Using previous prices * current quantity
What is real GDP per capita?
Real gdp/population
What is the formula for percentage change? (whether in real or nominal terms)
((new gdp/old gdp)-1)*100
What are alternate approaches to GDP?
factor income approach
value-added approach
What is Factor Income Approach
Adds up the income generated by producing goods and services
y=employee compensation+rent+interest+profit
What is Value-Added approach
Add up each addition of value. Pretty simple
What is GNP?
Gross national product
production including citizens overseas or across borders.
