Chapter 21 - Measuring National Output and National Income Flashcards
national income and product accounts
Data collected and published by the government describing the various components of national income and output in the economy.
gross domestic product (GDP)
The total market value of all final goods and services produced within a given period by factors of production located within a country.
final goods and services
Goods and services produced for final use.
intermediate goods
Goods that are produced by one firm for use in further processing by another firm.
value added
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.
gross national product
GNP
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.
expenditure approach
A method of computing GDP that measures the total amount spent on all final goods and services during a given period.
income approach
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.
personal consumption expenditures (C)
Expenditures by consumers on goods and services.
durable goods
Goods that last a relatively long time, such as cars and household appliances.
nondurable goods
Goods that are used up fairly quickly, such as food and clothing.
services
The things we buy that do not involve the production of physical things, such as legal and medical services and education.
gross private domestic investment (I)
Total investment in capital—that is, the purchase of new housing, plants, equipment, and inventory by the private (or nongovernment) sector.
nonresidential investment
Expenditures by firms for machines, tools, plants, and so on.
residential investment
Expenditures by households and firms on new houses and apartment buildings.
change in business
inventories
The amount by which firms’ inventories change during a period. Inventories are the goods that firms produce now but intend to sell later.
depreciation
The amount by which an asset’s value falls in a
given period.
gross investment
The total value of all newly produced capital goods (plant, equipment, housing, and inventory) produced in a given period.
net investment
Gross investment minus depreciation.
government consumption and gross investment (G)
Expenditures by federal, state, and local governments for final goods and services.
net exports (EX – IM)
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.
national income
The total income earned by the factors of production owned by a country’s citizens.
compensation of employees
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.
proprietors’ income
The income of unincorporated businesses.
rental income
The income received by property owners in the form of rent.
corporate profits
The income of corporations.
net interest
The interest paid by business.
indirect taxes minus subsidies
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.
net business transfer payments
Net transfer payments by businesses to others.
surplus of government enterprises
Income of government enterprises.
net national product (NNP)
Gross national product minus depreciation; a nation’s total product minus what is required to maintain the value of its capital stock.
statistical discrepancy
Data measurement error.
personal income
The total income of households.
disposable personal income or after-tax income
Personal income minus personal income taxes. The amount that households have to spend or save.
personal saving
The amount of disposable income that is left after total personal spending in a given period.
personal saving rate
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.
current dollars
The current prices that we pay for goods and services.
nominal GDP
Gross domestic product measured in current dollars.
weight
The importance attached to an item within a group of items
base year
The year chosen for the weights in a fixed-weight procedure.
fixed-weight procedure
A procedure that uses weights from a given base year.
underground economy
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.
gross national income (GNI)
GNP converted into dollars using an average of currency exchange rates over several years adjusted for rates of inflation.
