GDP Flashcards

1
Q

GDP

A

Total value of output produced within a country over a set period of time

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2
Q

Method of measuring GDP

A

Income: Rent + wages + profits + interest
Product: Gross valued added + tax - subsides
Expenditure: GS + C + I + NX

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3
Q

Nominal GDP

A

GDP at current prices

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4
Q

Real GDP

A

GDP adjusted for inflation

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5
Q

GDP deflator

A

= Nominal GDP / Real GDP

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6
Q

Limitations of GDP

A

Inequality
Hidden economy
Subsistence production
Cash in hand work
Other factors: Crime, environment

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7
Q

Economic growth

A

Percentage increase in national output, normally expressed over a given period

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8
Q

Government aims for economic growth

A

High, stable, and sustainable

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9
Q

Actual growth

A

Percentage annual increase in national output or GDP

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10
Q

Potential growth

A

Percentage increase in long run aggregate supply. Increase in the quality or quantity of resources

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11
Q

Output gap

A

Difference between actual and potential growth

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12
Q

Business cycles

A

Intervals of expansion and recession in economic activity

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13
Q

Stock of capital(K)

A

Fundamental resource of an economy

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14
Q

Marginal efficiency of capital

A

The annual extra income yielded by an increase in capital stock, relative to the cost of said capital
MEC=∆Y/∆K=∆Y/I

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15
Q

Potential economic growth equation

A

=Fraction of GDP allocated to new investment * MEC

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