Chapter 7: Measuring the Wealth of Nations Flashcards
Define ‘Macroeconomics’.
The study of the economy on a regional, national, or international scale.
Define ‘Gross domestic product (GDP)’.
The sum of the market values of all final goods and services produced within a country in a given period of time.
Define ‘Gross national product (GNP)’.
The sum of the market values of all final goods and services produced plus capital owned by the residents of a country in a given period of time.
Define ‘Consumption’.
Spending on goods and services by private individuals and households.
Define ‘Investment’.
Spending on productive inputs, such as factories, machinery, and inventories.
Define ‘Inventory’.
The stock of goods that a company produces now but does not sell immediately.
Define ‘Government purchases’.
Spending on goods and services by all levels of government.
Define ‘Net exports’.
Exports minus imports; the value of goods and services produced domestically and consumed abroad minus the value of goods and services produced abroad and consumed domestically.
Define ‘Real GDP’.
GDP calculation in which goods and services are valued at constant prices.
Define ‘Nominal GDP’.
GDP calculation in which goods and services are valued at current prices.
Define ‘GDP deflator’.
A measure of the overall increase in prices in an economy, using the ratio between real and nominal GDP.
GDP deflator = nGDP/rGDP x100
Define ‘GDP per capita’.
A country’s GDP divided by its population.
Define ‘Recession’.
A period of significant economic decline.
Define ‘Depression’.
A particularly severe or extended recession.
Define ‘Green GDP’.
An alternative measure of GDP that subtracts the environmental costs of production from the positive outputs normally counted in GDP.
GDP is usually calculated on an annual and quarterly (3 month, typically seasonally adjusted annual rate) basis; only ___ goods and services being produced within that time period are counted.
New.
What are the 3 different ways that economists can think about the size of a national economy? (All equivalent)
- How much is produced (output)
- How much is spent (expenditures)
- How much income is earned.
What are the 3 different approaches that are used to calculate GDP? (All equivalent)
- Expenditure: All spending on goods and services produced in an economy and subtracting spending on imports, Y = C + I + G + NX (exports-imports)
- Income: Income of everyone in a country, Y = wages + interest + rental income + profits
- Value-added: Valued added at ache stage of production
How do you calculate inflation rate?
(deflator_current yr - deflator_previous yr) / deflator_previous yr x100
To track changes in an economy over time, we can calculate the real GDP growth rate. How is it measured?
Measure as the % change in real GDP from 1 time period to the next, typically annually or quarterly at an annual rate.
GDP growth rate = (current yr - previous yr) / previous yr x100
GDP is a rough measure of the average standard of living in a country, but does not tell us about the distribution of wealth. What are other limitations of GDP?
Its measurement of home production, the underground economy, environmental degradation, and well-being.
