Chapter 2- The Data Of Micro Flashcards
What the GDP tells us?
- Total income of everyone in the economy
- Total expenditure on the economy’s output of goods and services.
Why GDP equals the income and also the expenditure?
Because every transaction has a buyer and a seller.
Define stock
Quantity measured at a specific point in time
Define flow
Quantity measured per unit of time
GDP is flow or stock variable?
Flow: because it tells us how many dollars are flowing around the economy’s circular flow per unit of time
How is stock and flow related?
We could say that stock is the accumulation of flow
Does the GDP measures the value of used goods?
No, it only measures the value of currently produced products.
What is value added? What is its equation?
Value firm adds to final price before selling (taking into account intermediate goods or input goods)
Value added = value of firm output - value of input goods
What is imputed value?
An estimate of goods that are not sold in a marketplace.
Define nominal GDP. When to use it?
Total value of goods and services produced in an economy, measured at current market prices.
We use it to assess the overall size of the economy.
Define real GDP.
When to use it?
Total value of goods and services produced in an economy, adjusted for inflation
We use it to assess the actual growth of the economy, independent of the effects of inflation.
Which is better is a measure of economic well-being, real or nominal GDP?
Real GDP, because it is not influenced by change in price.
Define GDP deflator. How to use it?
A measure of inflation in an economy. It works by comparing price of good X relative to its price in the base year.
We use it to assess the overall level of inflation in an economy.
How national income accounts divide GDP?
Define each one
Consumption: household expenditure on goods and services.
Investment: items bought for future use
Government purchases: goods and service bought by the government.
Net exports: net expenditure from abroad on nation goods, which provides income for domestic producers.
GDP- Consumption
What are the type of goods?
Durable goods: goods that last a long time
Non-durable goods: goods that last only a short time
GDP- investment
What are the 3 types of investment?
Business fixed investment: firm purchases of new goods.
Residential fixed investment: households purchases on new housing.
Inventory investment: increase in firms’ inventories of goods.
GDP- investment
What type of purchases are considered investment?
When we create and add a new asset to the economy.
Not when we reallocate ownership
Define GNP.
When to use it?
Gross national product measures the total value of goods and services produced by a country’s citizens (domestically and abroad)
We use it to assess the economic performance of a country’s citizens.
Define NNP.
When to use it?
Net national product measures total value of goods and services produced by a country citizens. (Domestically and abroad)
But adjusted for depreciation.
We use it to assess the overall health of a country’s economy, independent of the effects of depreciation. It calculates how much new wealth is being created.
Define national income
When to use it
Total income earned by a country’s citizens (domestic earning)
We use it to assess the overall level of economic activity in an economy
Define personal income
When to use it
Total income received by households and non-corporate businesses.
We use it to assess the purchasing power of consumers.
Define disposable personal income
When to use it?
Amount households and non-corporate businesses have available to spend after paying taxes.
We use it to assess the potential for consumer spending.
Define depreciation of capital
Amount of the economy’s stock of goods that wears out during the year.
Define Proprietors’ income
The income of the owner of sole ownership company
