ECON PRELIM 2 Flashcards
the value of the goods and services produced within the country. In equilibrium, the amount of output produced equals the amount demanded
Gross Domestic Product
provides structure for our macroeconomic theory models
National Income Accounting
Measures total income of everyone in the
economy.
Also measures total expenditure on the economy’s output of goods and services
GDP
For the economy as a whole
Because every peso a buyer spends is a peso of income for the seller.
income equals expenditure
A mathematical expression that shows the relationship of inputs (land, labor, capital) and outputs (goods or services)
production function
output = f(land,labor,capital)
Production side: output = payments to workers in wages,
capital in interest and dividends
Demand side: output = purchases by different sectors of the economy
the market value of all final goods & services produced within a country in a given period of time
GDP
Goods are valued at their market prices, so:
▪All goods measured in the same units (e.g., peso in the Philippines)
▪Things that don’t have a market value are excluded, e.g., housework you do for yourself
intended for the end user
final goods, GDP only includes FINAL GOODS
used as components
or ingredients in the production of other goods
intermediate goods
GDP INCLUDES:
-only final goods
-tangible and intangible goods
-currently produced goods, not produced from the past
-measures the value of production that occurs within a country’s borders, whether done by its own citizens or by foreigners located there.
GDP 4 components:
government purchases
investment
consumption
net export
Total spending by households on goods and
services
consumption
include:
rent payments
imputed rental value of house
not included:
purchase price/mortgage payment
purchases of new housing
Total spending on goods that will be used in the
future to produce more goods
investment
Business capital: business structures, equipment, and intellectual property products
Residential capital: landlord’s apartment building; a homeowner’s personal residence
Inventory accumulations: goods produced but not yet sold
“Investment” does not mean the purchase of financial
assets like stocks and bonds
All spending on the goods and services purchased by the government
At the nati onal, state, and local levels.
Excludes transfer payments
Such as Social Security or unemployment
insurance benefits.
They are not purchases of goods and services
government purchases (not included SSS or unemployment insurance benefits
represent foreign spending on the economy’s g&s.
export
a statistical framework of the economy’s production, expenditures and income, and records the annual flow of goods and services in the economy during a given time period
national income account
It provides information on the performance of the economy using the following macroeconomic indicators:
national income account
the total market value of all final goods and services produced within a given period by factors of production owned by a country’s citizens, regardless of WHERE the output is produced.
is equal to GDP + net primary income
GNP
measures the difference between the earnings of Phil. residents in other countries and the earnings of foreigners in the Philippines.
Net Factor Income (Payments from) Abroad/ Net Primary
Income
Accounts the value of all final goods and services within a county given a period of time.
GDP
Adding factor payments include receipts from abroad made to GDP
GNP = GDP + Net Factor Payments from abroad
GNP
Total amount of money earned by a nation’s people and businesses
The same with GNP but this involves accounting indirect business taxes
GNI
-refers to expenditure of households on durable and non -durable goods/services.
personal consumption expenditure
includes expenditures on construction of residential and non-residential buildings, plants, equipment and machineries.
gross private domestic investment
what is left when allowance for depreciation is deducted from
net private domestic investment
are those purchases of goods for social services such as on education, health, defense, transportation, roads and bridges etc.
government purchases
is the difference between the value of goods and services sold to other countries
(exports) and (imports), the value of goods and services bought from a foreign country (Exports-Imports).
net exports
the aggregate or total earnings of the factors of production as a result of the productive activities during the given period.
national income
the market value of new goods that are produced during the given period after deducting that part of the current output that are used to replace the worn-out capital goods.
net national product
the payment for the use land, buildings, equipment and other properties.
rent income
received as compensation by employees/ workers
salaries
are the earnings from deposits and on bonds and other securities and credit instruments.
interest
refers to the earnings from the business of sole proprietor or entrepreneur.
proprietor’s income
part of the corporate income/ profit that is distributed to stockholders, as their share in the profit of the corporation
dividend
part of the income of the corporation that is retained and not distributed to the stockholders. It may be used for expansion and business development.
undistributed corporate income
Gross Income that accrues to the household coming from factor payments.
personal income
Non-labor income transferred from government to household. Example: 4Ps, pension
transfer payments
This is the total income left to households after deducting taxes and other personal charges and adding transfer payments. This is also known as after-tax-income.
personal disposable income
This is the allowance for the wear and tear of durable assets. This is added because it is part of income deducted in calculating profit.
depreciation allowance/capital consumption allowance
Taxes levied on business. E.g.
* license fees, sales tax, custom duties.
indirect business tax
Real GDP per capita is the main indicator of the average person’s standard of living.
measures how much output on income was produced or received on the average by an individual in an economy.
GDP per capita
