Ch 10 Measuring a Nation's Income Flashcards
What two things does GDP measure at once?
1) The total income of everyone in the economy
2) Total expenditure on the economy’s output of goods and services
For an economy as a whole, income must equal expenditure.
Every dollar of spending by some buyer is a dollar of income for some seller.
What is GDP?
the market value of all final goods and services produced within a country in a given period of time
What is the total income earned by a nation’s permanent residents?
Gross National Product
The total income of a nation’s residents minus losses from depreciation
Net National Product
What is the formula for GDP?
Y = C + I + G + NX
What is spending by households on goods and services except housing?
Consumption
What is the purchase of capital goods that will be used in the future to produce more goods and services
Investment
This includes spending on goods and services by local state and federal governments
Government purchases
When the government pays a social security benefit to a person who is elderly or an unemployment insurance benefit to a worker who was laid off, what is that called and is it included in GDP?
transfer payment. and no it is not included.
What happens to GDP when someone buys a phone abroad?
Consumption increase, Net export decrease, result is no effect in gdp
What measures the changes in prices for all of the goods and services produced in an economy?
GDP Deflator
What is the difference of GDP deflator and Consumer Price Index?
1) GDP deflator only measures domestic products
2) GDP deflator measures the prices of all goods and services unlike cpi which focuses on a basket of goods
Angus the sheep farmer sells wool to Barnaby the knitter for $20. Barnaby makes two sweaters, each of which has a market price of $40. Collette buys one of them, while the other remains on the shelf of Barnaby’s store to be sold later. What is GDP here?
- GDP measures the value of all goods and services PRODUCED, not SOLD.
Formula for GDP Deflator
(nominal gdp / real gdp) * 100
Why does expenditure = income?
for every transaction, there is a buyer and a seller and money is simply exchanged.
