Econ-Chapter 9 Flashcards
Free markets work to max the value the creation of a nation
this value is :
consumed quickly
consumed slowly
saved for future use
wealth
is a stock, accumulated past value that you have saved
income
is a flow, reflects value creation
in macroeconomics each unit of a good or service is valued at its
price
final goods
those sold to a final user
intermediate goods
those not sold to a final user
gross domestic product, GDP
is the current market value of all final goods and services produced within the country’s borders in one year
the largest GDP is the US with
over 16.8 tril
GDP does not count all transactions that take place because there are no records or market values for some production, and
because other transactions would cause double counting
GDP does NOT include
- production of underground illegal goods
- production of underground legal goods
- production that does not enter the markets
- sales of used goods (but the services of the middleman are)
- financial transactions
- government transfer payments
- value of leisure
- subtract bads
transfer payments
taking from one person and giving to another but not in return for any good or service
bads
unwanted phenomena
the expenditure approach
to discuss GDP, we add up the current market value of all final goods and services
the income approach
adds up all the payments to factors of production-the wages, interest, rents, and profits-generated by production
in macroeconomics
input=output
consumption
spending by consumers on nondurable goods, durable goods, and services
investment
spending by business on capital (plant, equipment, tools, etc.), changes in business inventories, and spending on new residential housing
government purchases
spending by all levels of government on goods and services
net exports
exports-imports
real GDP
which is what GDP would be if prices had remained the same as they were in a base year. this reflects only quantity changes
economic growth
is the percentage change in real GDP
we only look at..
growth rates in real GDP, which are the same, no matter which base year is used
recession
two successive quarters of negative economic growth
the business cycle
describes the ups and downs of the economy
expansion
an increase in real GDP
peak
real GDP is at a temporarily high
contraction
when real GDP falls the economy suffers
trough
real GDP is at a temporarily low
recovery
when real GDP grows from the trough
GDP tells us
the size of an economy for comparison, and is used to examine economic growth over time
per capita GDP
GDP divided by the population, helps us measure the wellbeing of different countries
per capita GDP does not take into account..
the distribution of income within a country
