Chapter 21 - Measuring National Output and National Income

Question 1

national income and product accounts

Answer 1

Data collected and published by the government describing the various components of national income and output in the economy.

Question 2

gross domestic product (GDP)

Answer 2

The total market value of all final goods and services produced within a given period by factors of production located within a country.

Question 3

final goods and services

Answer 3

Goods and services produced for final use.

Question 4

intermediate goods

Answer 4

Goods that are produced by one firm for use in further processing by another firm.

Question 5

value added

Answer 5

The difference between the value of goods as they leave a stage of production and the cost of the goods as they entered that stage.

Question 6

gross national product

GNP

Answer 6

The total market value of all final goods and services produced within a given period by factors of production owned by a country’s citizens, regardless of where the output is produced.

Question 7

expenditure approach

Answer 7

A method of computing GDP that measures the total amount spent on all final goods and services during a given period.

Question 8

income approach

Answer 8

A method of computing GDP that measures the income—wages, rents, interest, and profits— received by all factors of production in producing final goods and services.

Question 9

personal consumption expenditures (C)

Answer 9

Expenditures by consumers on goods and services.

Question 10

durable goods

Answer 10

Goods that last a relatively long time, such as cars and household appliances.

Question 11

nondurable goods

Answer 11

Goods that are used up fairly quickly, such as food and clothing.

Question 12

services

Answer 12

The things we buy that do not involve the production of physical things, such as legal and medical services and education.

Question 13

gross private domestic investment (I)

Answer 13

Total investment in capital—that is, the purchase of new housing, plants, equipment, and inventory by the private (or nongovernment) sector.

Question 14

nonresidential investment

Answer 14

Expenditures by firms for machines, tools, plants, and so on.

Question 15

residential investment

Answer 15

Expenditures by households and firms on new houses and apartment buildings.

Question 16

change in business

inventories

Answer 16

The amount by which firms’ inventories change during a period. Inventories are the goods that firms produce now but intend to sell later.

Question 17

depreciation

Answer 17

The amount by which an asset’s value falls in a

given period.

Question 18

gross investment

Answer 18

The total value of all newly produced capital goods (plant, equipment, housing, and inventory) produced in a given period.

Question 19

net investment

Answer 19

Gross investment minus depreciation.

Question 20

government consumption and gross investment (G)

Answer 20

Expenditures by federal, state, and local governments for final goods and services.

Question 21

net exports (EX – IM)

Answer 21

The difference between exports (sales to foreigners of U.S.- produced goods and services) and imports (U.S. purchases of goods and services from abroad). The figure can be positive or negative.

Question 22

national income

Answer 22

The total income earned by the factors of production owned by a country’s citizens.

Question 23

compensation of employees

Answer 23

Includes wages, salaries, and various supplements—employer contributions to social insurance and pension funds, for example—paid to households by firms and by the government.

Question 24

proprietors’ income

Answer 24

The income of unincorporated businesses.

Question 25

rental income

Answer 25

The income received by property owners in the form of rent.

Question 26

corporate profits

Answer 26

The income of corporations.

Question 27

net interest

Answer 27

The interest paid by business.

Question 28

indirect taxes minus subsidies

Answer 28

Taxes such as sales taxes, customs duties, and license fees less subsidies that the government pays for which it receives no goods or services in return.

Question 29

net business transfer payments

Answer 29

Net transfer payments by businesses to others.

Question 30

surplus of government enterprises

Answer 30

Income of government enterprises.

Question 31

net national product (NNP)

Answer 31

Gross national product minus depreciation; a nation’s total product minus what is required to maintain the value of its capital stock.

Question 32

statistical discrepancy

Answer 32

Data measurement error.

Question 33

personal income

Answer 33

The total income of households.

Question 34

disposable personal income or after-tax income

Answer 34

Personal income minus personal income taxes. The amount that households have to spend or save.

Question 35

personal saving

Answer 35

The amount of disposable income that is left after total personal spending in a given period.

Question 36

personal saving rate

Answer 36

The percentage of disposable personal income that is saved. If the personal saving rate is low, households are spending a large amount relative to their incomes; if it is high, households are spending cautiously.

Question 37

current dollars

Answer 37

The current prices that we pay for goods and services.

Question 38

nominal GDP

Answer 38

Gross domestic product measured in current dollars.

Question 39

weight

Answer 39

The importance attached to an item within a group of items

Question 40

base year

Answer 40

The year chosen for the weights in a fixed-weight procedure.

Question 41

fixed-weight procedure

Answer 41

A procedure that uses weights from a given base year.

Question 42

underground economy

Answer 42

The part of the economy in which transactions take place and in which income is generated that is unreported and therefore not counted in GDP.

Question 43

gross national income (GNI)

Answer 43

GNP converted into dollars using an average of currency exchange rates over several years adjusted for rates of inflation.