Chapter 7 Terms Flashcards
The techniques used to measure the overall production of a country’s economy as well as other related variables.
National income accounting
The total market value of all final goods and services produced annually within the boundaries of a nation.
Gross Domestic Product (GDP)
Products that have been purchased for final use (rather than for resale or further processing or manufacturing).
Final Goods and Services
Products that are purchased for resale or further processing or manufacturing
Intermediate Goods and Services
The value of a product sold by a firm less the value of the products (materials) purchased and used by the firm to produce that product
Value Added
The dollar value of the economic activity taking place at every stage of production and distribution. By contrast, gross domestic product (GDP) only accounts for the value of final output
Gross Output (GO)
Wrongly including the value of intermediate goods in the gross domestic product; counting the same good or service more than once
Multiple Counting
The method that adds all expenditures made for final goods and final services to measure the gross domestic product
Expenditures Approach
The method that adds all the income generated by the production of final goods and final services to measure the gross domestic product
Income Approach
The expenditures of households for both durable and nondurable consumer goods
Personal Consumption Expenditure (C)
A consumer good with an expected life (use) of three or more years
Durable Good
A consumer good with an expected life (use) of less than three years
Non-durable Good
An (intangible) act or use for which a consumer, firm, or government is willing to pay
Service
Expenditures that increase the nation’s stock of capital, which is the collection of physical objects and intangible ideas that help to produce goods and services. Includes spending on final purchases of plant, machinery, and equipment by business enterprises; residential construction; changes in inventories; expenditures on the research and development (R&D) of new productive technologies; and money spent on the creation of new works of art, music, writing, film, and software
Gross Private Domestic Investment (Ig)
Gross private domestic investment less consumption of fixed capital; the addition to the nation’s stock of capital during a year
Net Private Domestic Investment
Expenditures by government for goods and services that government consumes in providing public services as well as expenditures for publicly owned capital that has a long lifetime; the expenditures of all governments in the economy for those final goods and final services
Government Purchases (G)
Exports minus Imports
Net Exports (Xn)
A national income accounting category that includes such taxes as sales, excise, business property taxes, and tariffs that firms treat as costs of producing a product and pass on (in whole or in part) to buyers by charging a higher price.
Taxes on Production and Imports
Total income earned by resource suppliers for their contributions to gross domestic product plus taxes on production and imports; the sum of wages and salaries, rent, interest, profit, proprietors’ income, and such taxes.
National Income
An estimate of the amount of capital worn out or used up (consumed) in producing the gross domestic product; also called depreciation.
Consumption of Fixed Capital
Gross domestic product less the part of the year’s output that is needed to replace the capital goods worn out in producing the output; the nation’s total output available for consumption or additions to the capital stock
Net Domestic Product (NDP)
The earned and unearned income available to resource suppliers and others before the payment of personal taxes
Personal Income (PI)
Personal income less personal taxes; income available for personal consumption expenditures and personal saving
Disposable Income (DI)
The techniques used to measure the overall production of a country’s economy as well as other related variables
National Income Accounting
GDP measured in terms of the price level at the time of measurement; GDP not adjusted for inflation. Compare with real gross domestic product (real GDP).
Nominal Gross Domestic Product GDP
Gross domestic product adjusted for inflation; gross domestic product in a year divided by the GDP price index for that year, the index expressed as a decimal. Compare with nominal GDP.
Real GDP
An index number that shows how the weighted-average price of a “market basket” of goods changes over time relative to its price in a specific base year.
Price Index
The year with which other years are compared when an index is constructed; for example, the base year for a price index.
Base Year
GDP Formula
Personal consumption + Gross Private Domestic Investment + Government Spending + Net Exports
