Chapter 1 & 2 Flashcards
endogenous variable
an endogenous variable is one that an economic model tries to explain
exogenous variable
an exogenous variable is one that an economic model takes for granted
market clearing
the assumption that markets are normally in equilibrium so the price of any good or service is found where supply and demand curves intersect
GDP mean
gross domestic product
The BEA is
the Bureau of Economic Analysis, a part of the U.S. Dept of Commerce
The purpose of the GDP is to be a gauge of
economic performance
Explain how GDP can be a measurement of both income and expenditure at the same time? Use an example.
income = production because if Dan sells Lisa a pizza for $2.50, he makes $2.50 in income while Lisa spends $2.50. So that transaction contributes $2.50 to theGDP, regardless of whether we are adding up all income or all expenditure.
What is national income accounting?
National income accounting is the accounting system that measures GDP and other related statistics
Define the national income accounts identity
GDP = C + I + G + NX GDP = sum of personal Consumption + Investments + Government Spending + net exports
Explain the components of a nation’s aggregate expenditure
personal consumption, gross private investments, government spending, and net exports
What is nominal vs real GDP?
Nominal GDP is the value of goods and services measured at current prices.
Real GDP is what economists use because it is the value of goods and services at a constant set of prices.
Chain-weighted measures of real GDP
A solution to the problem of dealing with changes to the base year, adopted in 1995: the base year prices change continuously over time. Avg prices in 2014 and 2015 are used to measure real growth from ‘14 to ‘15, etc
