Chapter 7: Measuring Output Flashcards

1
Q

Nominal gross domestic product (GDP)

A

the current dollar value of production.

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2
Q

intermediate goods

A

goods used to build or make another product that will be later sold

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3
Q

final goods and services

A

goods sold to the end user and not used to produce another product

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4
Q

consumption (C)

A

all expenditures made by households on goods and services, like clothing, food, electronics, and recreation during a given time period; sum of durables goods, nondurable goods, and services

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5
Q

gross investment (I) (or investment)

A

dollar value of all new capital purchased and the expansion of inventories in an economy during a given time period

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6
Q

3 gross investment categories

A

business fixed investment, residential investment, inventory investment

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7
Q

government purchases (G)

A

all final goods purchased by federal, state, and local governments (tanks, police cars, fire engines, labor such as police officers, teachers, etc.) during a given time period

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8
Q

imports (M)

A

goods, services, resources produced abroad and sold domestically

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9
Q

exports (X)

A

goods, services, resources produced domestically and sold abroad

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10
Q

net exports (NX)

A

NX = X (exports) - M (imports)

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11
Q

Questions to determine if included GDP

A
  1. Does the transaction represent new production of a final good or service?
  2. Who is purchasing the good or service?
  3. Where was the good or service produced originally?
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12
Q

consumer durables

A

Goods that have an average useful life of three years or more

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13
Q

consumer nondurables

A

Goods that have an average useful life of less than three years

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14
Q

services

A

outputs, often intangible, of the direct activities of another person

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15
Q

transfer payment

A

payment made by the government that does not require an exchange of economic activity in return (payments to households)

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16
Q

business fixed investment

A

purchased by firms of new capital goods such as offices, factories, tools, machinery

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17
Q

residential investment

A

purchases of new homes inc. home improvements

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18
Q

inventory investment

A

inventory changes from year to year; positive if inventory growing; negative if declining)

19
Q

depreciation

A

consumption of physical capital or value of capital that wears out, used up, obsolete during a year

20
Q

net investment

A

Gross investment minus depreciation

21
Q

GDP expenditures approach

A

approach to calculating nominal GDP that sums 4 categories of expenditures on final goods and services in an economy in a given time period

22
Q

national income

A

total payments to owners of resources plus profits and losses

23
Q

rent

A

payments made to land resources

24
Q

wages

A

payments made to labor resources

25
interest
a fee for the use of money over time; payments made to lender
26
profits and losses
payments accruing to owners of entrepreneurial ability
27
proprietor's income
profits and losses earned by individual proprietors
28
corporate profits
profits and losses of corporations
29
indirect business taxes
taxes paid by businesses (i.e.. property taxes, sales taxes, license fees)
30
net foreign factor income
difference between payments received from resources owned internationally and income earned by people in foreign countries from resources owned domestically
31
GDP income approach
GDP = National Income + Indirect business taxes + depreciation + net foreign factor income
32
real gross domestic product (real GDP, Y)
constant dollar value of all final goods and services produced in an economy during a given period of time (AKA inflation-adjusted GDP)
33
Difference between Nominal GPD and real GDP
prices used; nominal uses current prices and real uses prices from a base year (constant prices)
34
real GDP per capita
real GDP / population
35
inflation
a general increase in prices of goods and services
36
GDP price index
a price index based on all the goods and services that are counted as part of gross domestic product (AKA GDP deflator); way to measure the average price level in an economy;
37
Why GDP best measure of economic activity for a country?
1. G/S not bought in a formal market aren't included 2. G/S in underground economy not included 3. cannot account for the ultimate intangible: happiness
38
nominal GDP formula
Nominal GPD = C (consumption) +I (gross investment)+G (government purchases) +NX (net exports)
39
what year are real GPD and nominal GPD the same?
Base year
40
GPD price index formula
Nominal GDP/Real GDP x 100
41
home production
goods and services produced by a household and are not exchanged in a market
42
underground economy
economic activity where goods and services exchanged or payment but not counted as part of GDP (i.e. black markets)
43
national income formula
National Income = rent + wages + interest + | profits and losses