Chapter 13 Flashcards
Gross Domestic Product (GDP), how is it computed?
the dollar amount of all final goods and services produced within a country’s borders in a year; multiply all of the final goods and services produced in a 12 month period by their prices
What is excluded from GDP? (4)
- intermediate products
- secondhand sales
- nonmarket transactions
- underground economy
intermediate products
products used to make other products already counted in GDP
secondhand sales
the sale of used goods
nonmarket transactions
transactions that don’t take place in the marrket
underground economy
unreported legal and illegal activities
Limitations of GDP (2)
- composition of output
- quality of life
Gross National Product (GNP)
the dollar value of all final goods, services, and structures produced in 1 year with labor and property supplied by a country’s residents
Net National Product (NNP)
GNP minus depreciation charges for wear and tear on capital equipment
National Income (NI)
the income that is left after all taxes, except the corporate profits tax, are subtracted from NNP
Personal Income (PI)
the total amount the consumer sector has at its disposal after personal income taxes
Investment Sector (I)
proprietorships, partnerships, and corporations
Government Sector (G)
local, state, and federal levels of government
Foreign Sector (X - M)
all consumers and producers outside the US
The Output Expenditure Model
a macroeconomic model used to show aggregate demand by the consumer, investment, government and foreign
GDP = C + I + G + (X - M)
price index
a statistical series that can be used to measure changes in prices over time
base year
a year that serves as the basis of comparison for all other years
market basket
a representative selection of commonly purchased goods and services
consumer price index
index used to measure price changes for a market basket of frequently used consumer items
producer price index
measures price changes paid by domestic producers for their inputs
implicit GDP price deflator
an index of average levels of prices for all goods and services in the economy
Current GDP
when GDP isn’t adjusted to remove the effects of inflation
Real GDP
when the distortions of inflation have been removed
What does GDP measure?
The economy’s overall health
