Ch 17 - Output & Income 1 Flashcards
Define GDP (Gross Domestic Product)
Total market value of all final goods/services produced in time, in country
What’s Final Goods & Services?
The end products
What Income Approach? (GDP)
Counts income derived from production / EX: Wages, rental & interest income
What’s Expendure Approach (GDP)
All money spent buying the final goods / Who buys goods?
To check ______, you measure the ____
Economy / GDP
What does Circular Flow Diagram exclude
Gov / Financial System / Foreign Sector
4 factors of Expenditure? (GDP)
Consumption by Households / Investment by Business / Gov purchases / Exp by Foreign
GDP means… (simpler)
Total income of everyone in economy / Total expenditure on economy’s output of goods/services
Why do Expenditure = income?
Every transaction, the buyer’s Exp becomes the seller’s income. / Sum of all exp = sum of all income.
5 factors of Income? (GDP)
wages / rents / intrest / profits / stat adjustments
Things that don’t have a ___________ are ______ from ____.
Market Value / excluded / GDP
Examples of things w/ no market value & don’t count to GDP?
Cooking at home or doing the laundry (no transaction –> no MV
GDP includes all _________ and sold ____ in the _____.
items produced in the economy / legally / Market
Things excluded from GDP are..?
Items produced/sold illicitly / Stuff produced/consumed at home
GDP includes Final or Intermediate goods?
Final
FInal Goods?
Goods dat is ready to use. That’s the end
Intermediate Goods?
Goods as parts or ingredients in production of other goods / Excluding avoids double counting
Final Goods already ______ value of ________ goods in their ___________
embody / Intermediate / production
GDP includes goods/services ______ produced not ones produced in the _____
currently / past
GDP measure value of ______ within a _____ in a given _____. Either a yr or____
production / country / period // quarter
Flashy Car Company sold a used car. / Included in GDP? (Explain)
NO / Car was not sold officially this yr - not within a yr/qtr
Juanita Jones cooked meals for her family. / Included in GDP? (Explain)
NO / There’s no Market Value (price)
Air and water pollution increase. / Included in GDP? (Explain)
NO / There’s no Market Value on pollution
Define Consumption
Expenditures made by households on goods/services (clothing, food, electronics, etc) during time period.
Consumption includes….
Consumer Durables & Nondurables / Services
Define Consumer Durables (+ Examples)
Goods w/ avg life of more than 3 yrs / Cars, House
Define Consumer Nondurables (+ Examples)
Goods w/ avg life of less than 3 yrs / Food, clothes
Define Services (+ EXs)
Outputs, direct actives of another person / Doctor, haircut
Lucy goes out to a local restaurant for lunch. Her purchased lunch represents…? (What consumption?)
A service / Because she’s is at an restaurant
Define Investment
Dollar value of all new capital purchased & expansion of inventories in an economy.
3 investments are?
Business Fixed, Residential & Inventory Investment
Business Fixed Investment is…
Purchases by firms of new capital goods. (offices, factories, tools, etc)
Residential Investment is…
Purchases of new homes (like home
improvements)
Inventory Investment is…
Changes in inventories from one year to the next - If firms positive produce > sell / Negative if sell > produce
Positive & Negative net Investment mean
P - Capital stock growing / N - Capital stock shrinking
What are Gov Purchases
Spending on goods/services by local, state, & federal Govs
How to find Net Exports?
Exports – Imports = NX (Net E)
Define Exports
Foreigners buy from us & we ship to them
Define Imports
We buy from foreigners & they ship to us
Positive & Negative Net Export Value
P - Ex > Im / N - Im > Ex
When using the expenditures approach, the largest sector of GDP is usually the..?
Consumer Sector
Jolie spends $300 to buy her husband dinner at the finest restaurant in Dallas.
(effect on GDP & components)
C rise by $300 / GDP rise by $300.
Jose spends $800 on a tablet to use in his business. He got last year’s model on sale for a great price from a local manufacturer. (effect on GDP & components)
I & GDP unchanged / I (Jose’s business) rise by $800 / I (inventories) fall by $800
Kylie spends $1,200 on a new smartphone to use in her
business. The smartphone was built in China. (effect on GDP & components)
I rise by $1,200 / NX fall by $1,200 (cuz Imports rise by $1,200) / GDP unchanged
