Chapter 02 Flashcards
GDP Gross Domestic Product
The total income earned domestically, including the income earned by foreign-owned factors of production; the total expenditure on domestically produced goods and services.
National income accounting
The accounting system that measures GDP and many other related statistics.
Stocks and flows
Quantity variables; stocks are quantities measured at a given point in time, and flows are quantities measured per unit of time.
Value added
The value of a firm’s output minus the value of the intermediate goods the firm purchased.
Imputed value
An estimate of the value of a good or service that is not sold in the marketplace, and therefore does not have a market price.
Nominal GDP
The value of goods and services measured at current prices.
GDP Deflator
aka Implicit Price Deflator for GDP
The ratio of Nominal GDP (numerator) to Real GDP (denominator).
National income accounts identity
The equation showing that GDP is the sum of consumption, investment, government purchases, and net exports.
Consumption
The goods and services bought by households. It is divided into 3 subcategories: nondurable goods, durable goods, and services.
Nondurable goods
Goods that last only a short time, such as food and clothing.
Durable goods
Goods that last a long time, such as cars and TV’s.
Services
Includes various intangible items purchased by consumers, such as haircuts and doctor visits.
Investment
Goods bought for future use.
Business fixed investment
Purchase of new plant and equipment by firms.
Residential fixed investment
Purchase of new housing by households and landlords.
Inventory investment
The increase in frims’ inventories of goods. If inventories is falling, then inventory investment is negative.
Government purchases
Goods and services bought by the federal, state, and local governments. Includes items such as military equipment, highways, and the services provided by the government workers.
It does not include individual payments for Social Security and welfare.
Net exports
The value of goods and services sold to other countries (exports) minus the goods and services foreigners sell to us (imports).
CPI Consumer Price Index
A measure of the overall level of prices that shows the cost of a fixed basket of consumer goods relative to the cost of the same basket from a base year.
Labor force
Those in the population that have a job or are looking for a job.
Labor-force participation rate
The percentage of the adult population that is in the labor force.
GNP Gross National Product
GNP = GDP + Factors from payments abroad - Factor payments to abroad.
NNP Net National Product
NNP = GNP - Depreciation
