chap 5

Question 1

National Income accounting?

Answer 1

measurement of aggregate economic activity, patricularly national income and its components

Question 2

National accounting system answers what 3 questions?

Answer 2

1. How much output is being produced? What is it being used for?
2. How much income is being generated in the marketplace?
3. Whats happening to prices and wages?

Question 3

output?

Answer 3

combination of goods and services we produce

Question 4

GDP

Answer 4

total dollar value of final output (sum of all goods and services) produced each year

Question 5

Intermediate goods?

Answer 5

goods purchased for use as input in further stages of production

Question 6

value added?

Answer 6

increase in the market value of a product that takes place at each stage of the production process

Question 7

Nominal GDP

Answer 7

the value of final output measured in current prices

Question 8

Real GDP

Answer 8

value of output measured in constant prices

- to calculate real GDP, we adjust the market value of goods and services

Question 9

base year?

Answer 9

year used for comparative analysis; the basis for indexing price changes

Question 10

inflation

Answer 10

dollar value of output produced each year has risen considerably faster than the quantity of output, reflecting persistent increases in the price level

Question 11

production possibilities

Answer 11

alternative combinations of final goods and services that could be produced ina given time period with all avaliable resources and technology
- next year we wont be able to produce as much output unless we replace factors

Question 12

depreciation

Answer 12

value of capital used up in producing goods and services, the wearing out of plant and equipment/resources
- Subtract depreciation from GDP and we get Net Domestic Product

Question 13

Net domestic product?

Answer 13

amoutn of output we could consume without reducing our stock of capital and thus next years production possibilities

Question 14

gross investment

Answer 14

total investment expenditure in a given time period

Question 15

net investment

Answer 15

when rate of gross investment exceeds depreciation, net investment is positive, grpss investment less depreciation

Question 16

consumption goods?

Answer 16

goods and services used by households

Question 17

public sector?

Answer 17

federal, state, and local government

Question 18

what is the formula to calculate GDP and what does each letter stand for?

Answer 18

C+I+G+(X-M)
C= consumption expenditure
I=investment expenditure
G= government expenditure
X= exports
M=imports

Question 19

Net foreign factor income

Answer 19

wages, interest, profits paid to foreigners are not part of U.S. income

Question 20

National Income?

Answer 20

total income by current factors of production: GDP less depreciation, plus net foreign factor income

Question 21

personal income

Answer 21

amount of income received by households nefore payment of personal taxes

Question 22

disposable income

Answer 22

after tax income of households; personal income less personal taxes

Question 23

saving

Answer 23

disposable income that isnt spent on consumption