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ECO2013 > Chapter 21 > Flashcards

Chapter 21 Flashcards

1
Q

GDP stand for

A

Gross Domestic Product

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2
Q

GDP

A

the market value of all the final goods and services produced within a country in a given time period.

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3
Q

The Four Key Components when Measuring GDP

A

Value Produced, What Produced, Where Produced, When Produced

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4
Q

Value Produced

A

GDP is not concerned with the quantity of the items produced, but rather the market value of all items produced.

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5
Q

What Produced

A

GDP only includes final goods and not intermediate goods and services and those which are traded in the market.

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6
Q

Final goods and services

A

those that are produced for its final user and not as a component of another good or service.

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7
Q

Where Produced

A

Only goods and services that are produced within a country count as part of that country’s GDP.

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8
Q

When Produced

A

GDP measures the value of production during a given time period. This time period is either a quarter of a year—called the quarterly GDP data—or a year—called the annual GDP data.

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9
Q

The expenditure view of GDP is measured by what equation

A

Total Expenditure = C+I+G+NX

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10
Q

(expenditure approach) C =

A

Consumption expenditure

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11
Q

(expenditure approach) I =

A

Investment

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12
Q

(expenditure approach) G =

A

Government expenditure on goods and services

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13
Q

(expenditure approach) NX =

A

Net exports of goods and services

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14
Q

Consumption expenditure

A

The expenditure by households on consumption goods and services.

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15
Q

Investment

A

The purchase of new capital goods (tools, instruments, machines, and buildings) and additions to inventories.

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16
Q

Government expenditure on goods and services

A

The expenditure by all levels of government on goods and services.

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17
Q

Net exports of goods and services

A

The value of exports of goods and services minus the value of imports of goods and services.

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18
Q

Exports of goods and services

A

Items that firms in the United States produce and sell to the rest of the world.

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19
Q

Imports of goods and services

A

Items that households, firms, and governments in the United States buy from the rest of the world.

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20
Q

Used Goods

A

Expenditure on used goods is not part of GDP because these goods were part of GDP in the period in which they were produced and during which time they were new goods.

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21
Q

Financial Assets

A

When households buy financial assets such as bonds and stocks, they are making loans, not buying goods and services. The expenditure on newly produced capital goods is part of GDP, but the purchase of financial assets is not.

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22
Q

____ receive the incomes from the factors of production

A

Households

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23
Q

Labor earns ___, capital earns ___, land earns ___, and entrepreneurship earns ___.

A

Labor earns wages, capital earns interest, land earns rent, and entrepreneurship earns profits.

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24
Q

The income view of GDP is expressed by what equation

A

Income(Y)= C+S+NT

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25
Q

NT

A

Net Taxes

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26
Q

Net taxes

A

equals taxes paid minus cash benefits received and are the green flow from households to governments.

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27
Q

S

A

Saving

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28
Q

Saving

A

The amount of income that is not paid in net taxes or spent on consumption goods and services.

29
Q

The value of production equals _____ equals expenditure.

A

The value of production equals income equals expenditure.

30
Q

The expenditure approach measures GDP by

A

using data on consumption expenditure, investment, government expenditure on goods and services, and net exports.

31
Q

To measure GDP using the income approach we examine

A

the incomes that firms pay households for the services of the factors of production they hire—wages for labor services, interest for the use of capital, rent for the use of land, and profits for entrepreneurship—and sums those incomes.

32
Q

Incomes are divided into what two major categories

A

Wage Income and Interest, Rent and Profit Income

33
Q

Wage Income and Interest

A

compensation of employees

34
Q

Rent and Profit Income

A

net operating surplus

35
Q

What two components make up net domestic product at factor cost?

A

Wage Income and Interest, Rent and Profit Income

36
Q

Net domestic product at factor cost is not ___

A

GDP

37
Q

What adjustments need to be made to get from Net domestic product to GDP?

A

One from factor cost to market prices and another from net product to gross product.

38
Q

The expenditure approach

A

values goods and services at market prices

39
Q

The income approach

A

values goods and services at factor cost

40
Q

Factor cost

A

The cost of the factors of production used to produce them.

41
Q

Indirect taxes

A

Sales taxes

42
Q

Subsidies

A

Payments by government to firms

43
Q

_____ make these two values differ.

A

Indirect taxes (such as sales taxes) and subsidies (payments by government to firms)

44
Q

Sales taxes make ______ exceed factor cost, and subsidies make _____ exceed market prices.

A

Market prices; factor costs

45
Q

To convert the value at factor cost to the value at market prices, we must _____

A

add indirect taxes and subtract subsidies.

46
Q

The income approach measures __

A

net product

47
Q

The expenditure approach measures __

A

gross product

48
Q

The difference from indirect taxes and subsidies is _____

A

depreciation

49
Q

Depreciation

A

The decrease in the value of capital that results from its use and from obsolescence.

50
Q

The expenditure approach and income approach do not deliver exactly the same estimate of ___.

A

GDP

51
Q

The sum of expenditures might exceed the sum of ____. This is the notion of the statistical discrepancy.

A

incomes

52
Q

Statistical discrepancy.

A

The sum of expenditures exceeds the sum of incomes.

53
Q

Gross National Product (GNP)

A

The market value of all the final goods and services produced anywhere in the world in a given time period by the factors of production supplied by the residents of the country.

54
Q

Disposable personal income

A

The income received by households minus personal income taxes paid.

55
Q

Real GDP

A

The value of the final goods and services produced in a given year expressed in terms of the prices in a base year.

56
Q

Nominal GDP

A

The value of final goods and services produced in a given year expressed in terms of the prices of that same year.

57
Q

The goal of calculating real GDP is to

A

Measure the extent to which total production has increased and remove from the nominal GDP numbers the influence of price changes.

58
Q

We use estimates of real GDP for what three main purposes

A

:
To compare the standard of living over time, To track the course of the business cycle, To compare the standard of living among countries

59
Q

A nation’s standard of living is measured by the

A

value of goods and services that its people enjoy, on average.

60
Q

The metric most often used to determine standard of living is

A

real GDP per Capita (per person) which is determined by real GDP divided by population

61
Q

Real GDP per Capita (per person) is determined by

A

real GDP divided by population

62
Q

Potential GDP per person

A

The level of real GDP when all the economy’s factors of production are fully employed.

63
Q

The economy’s factors of production

A

labor, capital, land, and entrepreneurial ability

64
Q

Business cycle

A

A periodic but irregular up-and-down movement of total production and other measures of economic activity such as employment and income.

65
Q

2 phases of the Business Cycle

A

Expansion and Recession

66
Q

2 turning points of the phases of the business cycle

A

Peak and Trough

67
Q

GDP measures

A

The value of goods and services that are bought in markets.

68
Q

GDP measurements exclude

A

Household production, Underground production, Leisure time, Environment quality

ECO2013 (12 decks)

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