Chapter 7 Flashcards
what is the expenditure approach of measuring the sum GDP?
consumption + Investment + Government purchases + net exports
GDP is computed by using ______ prices
current year
Real GDP is computed by using ______ prices
base year
what are the three approaches for calculating GDP?
Expenditure, Income, and added value
investment is the sum of
= purchases of newly produced capital goods + changes in business inventories + purchases of new residential housing
GDP is _____ products produced. (sold and held in inventory)
ALL
Real GDP is GPD in ______ year prices
base year
what is economic growth?
Real GDP this year exceeds the REAL GDP last year
equation for real GDP =
(current year quantities)x(base year prices)
government purchases consists of dollars spent by
federal, state and local governments
consumption is the sum of
durable goods + nondurable goods + services
net exports is equal to
exports - imports
fixed investment =
business purchasing capital goods (machinery, facroties) + new residential housing
Rule of 72 equation
years to double = 72/growth rate per year
Gross domestic product = total market value of all final ____________ and ______________ produced ANNUALLY with the country’s borders
Goods; services
Expenditure approach
GDP = __________ + __________ + ___________ + (___________-___________)
Consumption + investment + government purchases + (exports - imports)
Investment consists of
New capital, residential housing, inventories
Social Security Payments are
Government transfer payments and are not included in the GDP
Why do economists take final foods and services into account when calculating GDP?
To avoid double-counting
What are the two approaches to measuring GDP
- Expenditure approach
- Income approach
- Added value approach
Investment is equal to all purchases of newly produced capital goods +
Changes in business inventories+ purchases of new residential housing
Depreciation refers to a decrease in the value of a good caused by
“wear and tear” of capital goods over time.
net domestic product =
GDP - capital consumption allowance (depreciation)
