Chapter 9 Flashcards
Final Goods
Those sold to a final user
Intermediate Goods
Those not sold to a final user
Gross Domestic Product (GDP)
Current market value of all final goods and services produced within country’s borders in one year (How big an economy is)
Transfer Payments
Taking from one person and giving to another, but not in return for any good or service (social security, unemployment insurance, and food stamps)
Bads
Unwanted phenomena such as disease, crime, and garbage
Keynesians says bad may increase GDP because…
we pay to lessen their effects (such as hiring policemen to combat new crime wave)
The Expenditure Approach
Add up current market values of all final goods and services
Income Approach
Adds up all payments to factors of production (wages, interest, rent, and profits generated by production)
Income =
Output
Consumption
Spending by consumers on nondurable goods, durable goods, and services
Investment
Spending by business on capital, changes in business inventories, and spending on new residential housing
Government Purchases
Spending by all levels of gvt on goods and services
Net Exports
Exports-imports
Government purchases is
second largest component
In calculating GDP
we use current market prices