Chapter 12: Measuring the Wealth of the Nation Flashcards
Define the Term: Gross Domestic Product
The total dollar value of all final goods and services a nation’s industries produce within its borders in one year
Define the Term: Final Goods and Services
Goods and services produced and sold to the ultimate end user
Define the Term: Intermediated Goods
Goods and services that someone purchased either to resell or incorporate into other goods
Define the Term: Nominal GDP
Measuring a countries GDP using current prices (not adjusted for inflation forward or retrospectively)
How is GDP measured?
Purchases of goods and services from Households, Businesses, the Government, and Foreign buyers
Define the Term: Consumer Durable Goods
Goods with a life expectancy of more than one year
Define the Term: Consumer nondurable goods
Goods with a life expectancy of less than one year
Define the Term: Gross Private Domestic Investment (GDPI)
Also known as business investment, spending on capital investment and unplanned inventory
Define the Term: Net Exports
All exports minus all imports
What are the major problems with the way GDP is measured?
Unrecorded transactions
Counterproductive items
Inflation
Changes in population
What tool do economists use to factor inflation into GDP calculation
GDP Deflator
After using GDP inflator to adjust GDP, what metric is created?
Real GDP
If there are more exports than imports there is a:
Trade Surplus
What are the primary reasons for trade deficits?
Domestic inability to produce Better quality of foreign goods Cheaper foreign materials Lower Foreign Wages Lower Foreign capital costs Foreign subsidies
What are the two primary policy types in regards to foreign trade
Protectionism/Free Trade
