Chapter 5: Measuring the performance of the economy Flashcards
Total production of goods and services is called…
GDP
What are the three methods of calculating GDP?
- Production method (value added)
- Expenditure method (final goods and services)
- Income method (incomes of different factors of production)
Total production (labour, natural resources, capital and entrepreneurship) = total income (wages, rent, interest and profits)
What are the following inputs called? Wages and salaries, rentals, interest and profit.
Primary inputs
What the following inputs called? Intermediate goods and services (flour for baking)
Secondary inputs
Total sales =
Total primary income + value of intermediate goods and services.
How do you get to the nett total of domestic product?
Gross minus consumption of fixed capital (depreciation)
Used to measure economic performance.
Depreciation is difficult to measure so GDP is used more often.
What 3 different prices are used when measuring GDP?
- Market prices: expenditure method
- Basic price: production method
- Factor price: income method
Indirect taxes or subsidies mean the amount paid for a good or service differs from the cost of production and incomes earned by the relevant factors of production.
What is the difference between product tax and production tax?
Product tax is taxed per unit
Production tax is not linked to a good or service (like payroll tax)
What are constant and current prices also known as?
Current = nominal GDP
Constant = real GDP (2010 base year)
How do you get GNI from GDP?
- subtract all benefits accruing to residents of other countries (BMW etc + interest paid to foreign entities)
- subtract all wages earned by foreign residents (Mozam, Lesotho, mineworkers etc)
- add benefits from abroad (foreign dividends earned locally and work done elsewhere)
- add wages earned by permanent residents of SA in other countries
How do we account for the changes in fixed goods?
Fixed capital formation: - buildings - machinery - equipment Changes in inventories: - Goods produced but not sold - goods produced earlier but sold in current period
What is GDE and how is it calculated?
Gross domestic expenditure.
C + I + G
Includes imports (not exports)
If GDP is larger than GDE then _ were greater than _.
Exports, Imports
Spending > production = more imports
Production > spending = more exports
What are the strict and expanded definitions of unemployment?
Strict: Actively looking but unemployed
Expanded: Desire for a job but unemployed
How does Stats SA collect their info?
- baskets of items used by a typical household.
- Baskets assigned weights.
- Base year selected
- Formula
- Collects prices
