Chapter 11 Flashcards
What is gross domestic product?
This is also called GDP and it is “The market value of all final goods and services produced in an economy during a period of time (a year)
What is a final good or service?
This is a good that has reached the hands of the final consumer
In order to measure GDP what three things are required??
- Use market values and net quantity. In this case market value refers to the dollar value or monetary value for each good and service
- Use only the FINAL goods and sercies to avoid double counting
- Use only the goods and service produced with the period considered
Draw a circular flow diagram
What are wages?
Payment for labor
What is interest?
Payment for financial capital
Rent
Paying for land
What is profit?
Payment for enteurpeurship
What is Transfer Payments (TP)?
Something that is made by the government to households but not for goods and services sold.
What is the equation for calculating GDP (in a local encomy)?
GDP=(Conumption)+(Investment)+(Government Expentidures)+(Net Exports)
i.e:
Y=C+I+G+NX
In terms of GDP define consumption?
Household spending on goods and services excluding payment for new houses or homes
In terms of GDP what is investment?
Firms spending on equipmetn tools and machine, including house hold spending on new homes
In terms of GDP what’s an Government Expenditure?
Federal state and local goverment spednign on goods and services
How do you find your net export?
(Exports)-(Imports)
What is the value added method?
This refers to additional value a firm gives a product.
It is the difference between teh price the firm sells the good for and the price the firm paid for the intermiate good used to produce the good.
