Ch 17 - Outcome & Income 2 Flashcards
Expenditures Approach v. Income Approach
EA - Who bought what? / IA - Who earned what?
Incomes divided in 2 categories
wages / interest, rent & profits
Define Income Approach
Use income 4 GDP / uses payments to main factors of production in form of rent ,wage, interest & profit services in the yr
Info on what’s include in Wages?
Net wages & salaries + fringe benefits paid by employers (health care insurance, social security & pension fund contributions)
Define Intrest
income households receive on loans -
interest they pay for borrowing
Define Rent & Profit
R - payments for land & rented inputs / P - profits of corporations & small businesses
Using Income approach, u calculate GDP by adding up…
Indirect business taxes / Depreciation / Net foreign factor income / National income
Define Net Foreign Factor Income
Foreign resources & income from foreign peeps minus resources owned domestically
Define National Income
Total payments to owners of resources + profits & losses / sum of rent, wages, interest, profits & losses
Define Depreciation
consumption of physical capital or value of capital that wears out, used up, or becomes obsolete
Define Indirect Business Taxes
Tax paid by businesses (property, sales taxes, tariffs, etc..)
Info on Indirect Business Tax
Paid by firms & passed to consumers as
part of price of good/service / Different from corporate income taxes on business profits.
What’s Nominal & Real GDP?
N - Total production valued @ current prices / R - Actual value of good/service produced
Real GDP removes _____ ______ from Nominal GDO
Price effect
Define & info on GDP price index
Price index based on goods/services / Part of GDP / Sometimes called GDP deflator
(Math equation) DP Price index =
N GDP / R GDP then multiply by 100
(Math equation) Real GDP =
N GDP / Pice Index (Hundredths)
