Econ Chapter 12 Notes Flashcards
What is GDP? What does it help determine? What does a rising GDP mean for the economy?
- The dollar value of all goods and services produced in the US for a given year
- GDP helps determine the health of the economy
- Rising GDP = healthy economy
What are the four Economic Sectors?
Household, Investment, Government, and Foreign
What does the Household Sector consist of?
Individuals and families
- Responsible for 75% of spending in our economy
What does the Investment Sector consist of?
All businesses
What does the Government Sector consist of?
federal, state, local (Ex: cities)
What does the Foreign Sector consist of?
consumers and producers in other nations
What are the Two Ways of Calculating GDP?
Expenditure Approach
Income Approach
What is the Expenditure Approach?
Consumer Goods + Producer Goods + Government Goods + Net Exports = GDP ($)
What is the Income Approach?
Wages + Interest + Rents + Profits = GDP ($)
What are the Four Types of Exclusions?
Intermediate Products
Secondhand Sales
Nonmarket Transactions
Underground Economy
What are Intermediate Products?
Goods used to produce other goods or services
What are Secondhand Sales?
Sales of used goods (not from a store)
What are Nonmarket Transactions?
services that are not paid for
What is the Underground Economy?
activities not reported for legal or tax reasons
What is Current GDP?
GDP that includes inflation
What is Real GDP
GDP where inflation has been removed
What are the characteristics of GDP Per Capita?
- Adjusting GDP for populations
- Crude measure on how well a society is doing
What are the Limitations of GDP? (3)
- Does not tell how output occurs
- Does not tell impact on quality of life
- GDP can hide distortions
What is GDP?
total dollar value of all goods and services produced in the U.S. in a year, even if the owners live somewhere else
Ex: Japanese auto plants in Ohio still count for U.S. GDP
What is GNP?
total dollar value of all goods and services produced anywhere in the world by labor and properly owned by US residents in one year
Ex: U.S. owned factories in China or Guatemala count for U.S. GNP
