Chapter 6: GDP Flashcards
Business Cycle
A periodic but irregular up-and-down movement of total production and other measures of economic activity
Expansion
Period during which real GDP increases
Recession
Period during which real GDP decrease for at least two quarters
Peak
The expansion ends and recession begins
Trough
A recession ends and an expansion begins
Gross Domestic Product (GDP)
The market value of the final goods and services produced within a country in a given time period (measure by quantity)
Final goods and services
A item that is bout by its final user during a specified time period (only use final goods for GDP)
Intermediate goods
An item that is produced by one firm, bought by another firm, and used as a component of a final good or service
GDP Formula
GDP = C + I + G + (EX-IM)
Nominal GDP
Value of final goods and services produced in a given year valued at the prices of that year
Real GDP
Value of final goods and services produced in a given year when valued at the prices of a reference base year
Compare across country: standard of living
GDP/Population = per capita GDP ($)
Compare across time: real GDP
P2016 x Q2016
P2010 x Q2010
GDP Deflector
GDP Deflector = Nominal GDP/Real GDP x 100%
Potential GDP
When all the economy’s land, labor, capital and entrepreneurship are fully employed, the value of real GDP is called potential GDP
