Chapter 7 Flashcards
Macro stats - GDP and price indexes
GDP
gross domestic product; measure the dollar market value of all final goods and services produced annually by the resources within a country
expenditure approach
C + I + G + X - M = GDP
C: personal consumption
I: gross private investment
G: government consumption/investment
X: exports
M: imports
resource cost-income approach
aggregate income (employee compensation, income of self-employed, rents, profits, interest) + non-income cost items (indirect business taxes and depreciation) + net income of foreigners = GDP
nominal vs. real GDP
nominal=money values; real=adjusted for inflation
CPI
consumer price index
who reports CPI, and what is the basis/what is measured?
reported by Bureau of Labor Statistics (Dept of Labor) monthly; measures the typical urban family, survey from 1982-84, 211 items, 26,400 stores across the country
GDP deflator: who reports it, what is the basis/what is measured?
reported by Bureau of Economic Analysis (Dept of Commerce) quarterly; measure impact of inflation on entire economy, (nominal GDP/real GDP)*100
inflation rate (formula)
(this year’s price index - last year’s price index) / last year’s price index *100
how to convert current figure into earlier figure (adjust wages today into wages from an earlier time period)
current figure = earlier figure * (price index current year / price index earlier year)
measure of well-being (it’s debatable if this is important)
real per capita GDP, life expectancy, time savings
inadequacies of GDP as a measure of well-being
doesn’t include unpaid production, doesn’t include underground economy, leisure time not counted, may not measure quality improvements, doesn’t account for “bad” (ex. pollution), doesn’t count war/terrorism/disease, includes the value of government expenditures without adjusting for waste & inefficiency
