Chapter 10 Flashcards
Income is the same as expenditures bc
Every transaction has two parties: a buyer and a seller; transaction contributes equally to the economy’s income and expenditures
GDP
The total market value (PxQ) of all final goods and services currently produced with in a country in a given period of time
Measures:
- Total income of everyone in the economy (wages, rent, and profit on factors of production)
- Total expenditures on the economy’s output of goods and services
Doesn’t include: financial investments (stocks/bonds), illicit items, intermediate goods
Includes: goods in inventory (subtracted later)
GDP formula
Y= C+Ig+G+Nx
Consumption 70%
Investments 15%
Government purchases 20%
Net exports -5% (trade deficit)
Consumption
Spending by households on goods and services with the exception of new housing
Includes: durable goods, non durable goods, services
Investment
Purchase of goods that will be used in the future to produce more goods and services. Sum of purchases of capital equipment, inventories, and structures
Includes expenditures on new housing
Government purchases
Spending on goods and services by local, state, and federal governments
Includes salaries of government workers and expenditures on public works
Transfer payments
Payments not made in exchange for a currently produced good or service
SSI
Medicare
Medicaid
Unemployment
Net exports
Exports - imports
Nominal GDP
Production of goods and services valued at current prices
Real GDP
Production of goods and services valued at constant (base-year) prices
GDP deflator
Reflects only prices of goods and services (not quantities)
GDP deflator = nominal GDP/real GDP x 100
Gross national product
Total income earned by a nations nationals
Includes income citizens earn abroad and excludes income foreigners earn here
*not significantly different from GDP in U.S. bc American involvement abroad is as much as foreign involvement here
Net national product
GNP - depreciation
National income
Total income earned by a nation’s residents in production goods and services
Personal income
Income that households and non corporate businesses receive
National income - retained earnings (income that corporations have earned but have not paid out to their owners)
Disposable personal income
Income that households and non corporate businesses have left after satisfying all their obligations to the government (taxes)
PI after taxes
