Chapter 7 Flashcards

1
Q

National Income and product accounts keep track of

A

flows of money in the economy

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2
Q

Business Cycle Sectors

A

Government, Household, Firms, Rest of the World

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3
Q

Government purchases, what do they give to Households

A

purchases g/s like education, defence, transfers payments, gives money to household

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4
Q

Households type of spending and where they purchase g/s

A

consumer spending, purchasing g/s through markets for goods and services

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5
Q

Firms purchases

A

investment spending to buy physical capital

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6
Q

Rest of World, where does their spending come

A

spending comes from exports, g/s sold to residents of other countries across globe

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7
Q

GDP: Gross Domestic Product

A

market value of ALL FINAL G/S produced within a country in a year, (overall output)

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8
Q

GDP per Capita

A

avg output per person, GDP/Population,

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9
Q

Why do we use final goods and service

A

to avoid multiple counting of intermediate goods

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10
Q

Final Goods and Services and example

A

g/s sold to the final/end user ex automobile

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11
Q

intermediate goods and example

A

g/s bought from one firm/individual by another firm/individual, input for production of final g/s ex steel used for automobiles

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12
Q

value added

A

value of sale - value of intermediate goods

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13
Q

aggregate expenditure

A

sum of consumer spending, government purchases of g/s, exports minus imports. Total spending on domestic final g/s

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14
Q

What is in GDP (3)

A

investment spending, capital spending, domestically produced final goods and services

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15
Q

investment spending

A

spending on physical capital ex machines tools

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16
Q

domestically produced final goods and services (5)

A

capital goods, new construction of stuctures, home based businesses, educational services, change to inventories

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17
Q

What is not in GDP (6)

A

spending on intermediate g/s, inputs, used goods, financial assets, imports, environmental damage

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18
Q

calculating GDP 3 methods

A

value added approach, expenditure approach, income approach

19
Q

value added approach

A

add up total value of all final g/s produced, value of sales- cost of intermediate goods

20
Q

the expenditure approach

A

adding up spending on all domestically produced goods and services, use the GDP equation

21
Q

expenditure equation (GDP equation)

A

GDP=C+I+G+X-IM

22
Q

Income Approach

A

adding up total factor income earned by households, from firms in the economy

23
Q

Factor Income and 4 examples

A

incomes earned by factors of production (wage, rent, interest, profit

24
Q

non factor payments and equation

A

earned by government as a result of production, prices paid for final goods -amount received by factors of production.

25
non factor payments include
net indirect taxes and capital depreciation
26
net indirect taxes
provincial/federal sales tax - subsidies paid to purchases
27
capital depreciation
removal of productive physical capital from capital stock as it wears out
28
aggregate output
total quantity of final goods and services economy produces
29
real GDP
calculated using prices of base year
30
nominal GDP
calculated using prices of current year
31
why do we prefer real GDP
able to focus on changes in quantity of output by eliminating influences of changes in prices
32
chained dollars
calculating changes in real GDP using average between growth rate w/ base year and growth rate with later base year
33
aggregate price level and how we calculate it
measure of overall level of prices in economy calculated by a market basket
34
market basket
hypothetical set of consumer purchases of goods and services
35
price index
measures cost of purchasing a given market basket in a given year normalized with base year
36
price index formula
price index in given year=(cost of market basket in given year/ cost of market basket in base year)x100
37
CPI: Consumer price index
measures cost of market basket and how it changes over time.
38
CPI formula
same equation as price index formula but with cost of FIXED Market Basket
39
Inflation rate
yearly percentage change in a price index, change in overall price level of economy
40
Inflation rate equation
price index in year2- price index in year1/ price index in year1
41
producer price index
measures changes in prices of goods and services purchased by producers
42
GDP Deflator
ratio of nominal GDP to Real GDP
43
GDP Deflator Equation
(nominal GDP/Real GDP)x100
44
Disposable Income
money left over after taxes, consumer spendings and transfer GDP-C-T+TR