chapter 7 Flashcards
growth
fundamental for soceity’s well-being, the more growth the better standards of living
tertiary sector
GDP or gross domestic product
or aggregate output, is all goods and sevices produced within a contry’s borders
can be gross or net
proxy for country’s wealth, GDP per capita is proxy for individuals’ wealth
it has to be kept slowly but steady
circular-flow diagram on open market
a market of goods and services receives government purchases (G) and investment by the firms (I). It exports to the rest of the world (X) and imports (IM). Consumers buy at the market their goods (C).
GDP can be calculated in 3 ways
total income
total spending
total sales
total sales or value added
value of all the goods and services domestically produced to which you have to take away the intermediate goods (value added)
total spending or aggregate spending
adding up all the spending in goods and services in the market of goods and services, looking only at the final goods.
G=C+I+G(gov)+X-IM
total income
adding up of the total factor income earned by households (during production). this is what the intermediate goods and factors of production earnt
nominal GDP
value of the aggregate ooutput using the current prices
real GDP
value of the final goods produced calculated using the prices of a selected base year
used in analysis of growht rate
calculate a good for the price of the base year, the second good for the price of the base year and sum them –> nominal gdp/gdp deflator
how to calculate inflation
aggregate price level is the overall price level in an economy
market basket and CPI
CPI or Consumer Price Index
market basket–> goods on a base year and another and confrotning the prices. then equation 95:100=100:x and find the percentage of the increase of prices
others can be PPI (Producer) or GDP deflator
you can do it against income to get a data on real wages
