Chp20 - GDP

Question 0

Chained-dollar real GDP

Answer 0

• a measure of real GDP; measure relative to a base year (e.g. 2012 GDP as expressed in 2002 dollar)
• Done by
  1) Value production in the prices of adjacent years
  2) Find the average of two percentage changes
  3) Link to the base year

Question 1

Business Cycle

Answer 1

• Periodic, but irregular fluctuation of of total production and other measures of economic activity
• Characterized by: Expansion & Recession
• Has two ‘turning-points’: Peak & Trough

Question 2

Cycle

Answer 2

• Where a variable tends to alternate between upward and downward movements

Question 3

Consumption Expenditure

Answer 3

• The total payment for consumer goods and services (c)

- the expenditure by households on goods and services produced in Canada and in the rest of the world

Question 4

Depreciation

Answer 4

• The decrease in the value of a firm’s capital that results from wear and tear, and obsolescence

Question 5

Expansion

Answer 5

• period in which real GDP increases

- part of the ‘business cycle’ occurring from trough to peak

Question 6

Exports

Answer 6

• Where a country sells goods and services to the rest of the world

Question 7

Final Good

Answer 7

• A good or service bought by a final consumer (e.g. Ford truck)
• Can either be consumption good or capital good
  
  • Consumption good - bought by final user for consumption
  • Capital good - bought by firm for use to provide further g&s

Question 8

Government Expenditure

Answer 8

• where government buys goods & services

Question 9

Gross Domestic Product (GDP)

Answer 9

• the market value of the final goods and services produced within a country within a given time period

Question 10

Gross Investment

Answer 10

• The total amount spent on both buying new capital and replacing depreciated capital

Question 11

Imports

Answer 11

• Goods & Services bought by a given country from the rest of the world

Question 12

Intermediate Good

Answer 12

• good or service bought in order to create another good or service (e.g. the tires bought to be put on a brand new truck)

Question 13

Net Exports

Answer 13

• The value of exports (X) - the value of imports (m)
• if positive: the net flow is from given country to the rest of the world
• if negative: the net flow is from rest of the world to given country

Question 14

Investment

Answer 14

• The purchase of new plant, equipment, and buildings, and additions to inventories by firms

Question 15

Net Investment

Answer 15

The amount by which the value of capital increases

Question 16

Nominal GDP

Answer 16

• The value of final goods and services produced in a given year when valued at the prices of that year

Question 17

Potential GDP

Answer 17

• the maximum level of real GDP that can be produced while avoiding shortages of labour, capital, land, and entrepreneurial ability that would bring rising inflation

Question 18

Real GDP

Answer 18

• the values of all final goods and services produced in a given year when valued at the prices of a reference base year
• done to compare different years and reveal the changes in production

Question 19

Real GDP per Person

Answer 19

• is real GDP divided by the population
• tells us the value of goods and services that the average person can enjoy
• helps control for rising prices and rising cost-of-living

Question 20

Recession

Answer 20

• period during which real GDP decreases for at least two successive quarters
• a period of significant decline in total output, income, employment, and trade usually lasting 6mons-1year, and marked by contractions in many sectors of the economy
• part of business cycle; takes place between peak and trough

Question 21

Time-Series Graph

Answer 21

• graph that measures time on the x-axis and the variable of interest on the y-axis

Question 22

Trend

Answer 22

• tendency for a variable to move in a particular direction

Question 23

Calculating GDP: Expenditure Approach

Answer 23

• measures GDP as the sum of consumption expenditure
• Requires
  
  • Consumption Expenditure (C)
  • Investment (I)
  • Gov. expenditure on goods & services
  • net exports of goods and services (X - M)