chapter 6.1 part 5 Flashcards
What is counted in GDP?
Consumption, business investment, government spending on goods and services, net exports.
What is not counted in GDP?
Intermediate goods, transfer payments, non-market activities, used goods, illegal goods.
Why is the underground economy of services ‘paid under the table’ and illegal sales not counted in GDP?
It is impossible to track these sales.
What did Friedrich Schneider’s recent study of shadow economies estimate?
He estimated the underground economy in the US to be 6.6% of GDP or close to $2 trillion dollars in 2013.
Why are transfer payments not included in GDP?
They do not represent production.
Why are goods you produce at home not included in GDP?
These goods are not sold in marketplaces.
What can we think GDP as?
Total production, total purchases, and total income.
What is a close cousin of GDP?
Gross national product.
What does GDP include?
Only what a country produces within its border.
What does GNP include?
What domestic businesses and labor produced abroad, subtracting any payments that foreign businesses and labor produced in the United States send home to other countries.
What is GNP in other words?
What a country’s citizens and firms produce, wherever they are located.
What is GDP in other words?
What happens within a certain country’s geographic borders.
What is the gap between GDP and GNP in the United States in recent years?
About 0.2%.
What is the gap between GDP and GNP in small nations?
They may have a substantial share of their population working abroad and sending money back home.
