Chapter 4 - Measuring Total Production and Income Flashcards
Microeconomics
Study of how housesholds & firms make choices;
how they interact in markets;
how the gov attempts to influence their choices
Macroeconomics
Study of the economy as a whole
What is the
Business Cycle
The alternating periods of expansion and recession that Canadian economy has experienced since Canada became a country
What happens during
Expansion
Period during which total production and total employment are increasing
What happens during
Recession
Period during which total production and total employment are decreasing
Economic growth
The ability of an economy to produce increasing quantities of goods & services
Inflation rate :
The % increase in the price level from 1 yr to the next
Gross Domestic Product (GDP) :
The market value of all final goods/services produced in a geographic area during a period of time
Measured using market values
Only includes the value of final goods & services
Includes only current production
Final good or service :
One that is purchased by its final user and isn’t included in the production of any other good/service
Intermediate goods :
A good/service that’s an input into another good/service, such as car seats
Transfer payments :
Social program payments
What are the 2 ways to measure GDP?
- Expenditure approach
- Income approach
Expenditure approach
Measuring GDP by adding up all the diff types of expenditure in the economy
Income approach :
Measuring GDP by adding up all the income received by the owners of factors of production
Gross operating surplus :
The payments made to the owners of capital by firms and gov for the use of their capital in producing goods/services
Net operating surplus :
The payments to the owners of capital over and above compensation for the consumption of their capital
Consumption of capital :
The amt of capital that wears out (depreciates) during use
Gross mixed income :
The income generated by small businesses
Taxes less subsidies :
The payment to gov that mimics income received by the owners of other inputs
Final consumption expenditure :
Purchases of goods/services that will be used to satisfy individual or community needs & wants
Gross fixed capital formation:
Purchases of capital by firms, Govs, and households
Net exports :
The value of a country’s total exports minus its imports
Statistical discrepancy :
1/2 of the diff between the estimates of GDP generated by the expenditure approach and the income approach
Value added :
The market value a firm adds to a product
Household Production :
Goods/services ppl produce for themselves
Informal economy :
Buying and selling of goods/services that is concealed from the gov to avoid taxes or regulations or bc the goods/services are illegal
Nominal GDP :
The value of final goods/services evaluated at current yr prices
Real GDP :
The value of final goods/services evaluated at base year prices
Price level :
A measure of the average prices of goods/services in the economy
Gross National Income :
The value of incomes received by Canadians for the use of their factors of production no matter where in the world those factors of production are used
