GDP Flashcards
GDP
Total value of output produced within a country over a set period of time
Method of measuring GDP
Income: Rent + wages + profits + interest
Product: Gross valued added + tax - subsides
Expenditure: GS + C + I + NX
Nominal GDP
GDP at current prices
Real GDP
GDP adjusted for inflation
GDP deflator
= Nominal GDP / Real GDP
Limitations of GDP
Inequality
Hidden economy
Subsistence production
Cash in hand work
Other factors: Crime, environment
Economic growth
Percentage increase in national output, normally expressed over a given period
Government aims for economic growth
High, stable, and sustainable
Actual growth
Percentage annual increase in national output or GDP
Potential growth
Percentage increase in long run aggregate supply. Increase in the quality or quantity of resources
Output gap
Difference between actual and potential growth
Business cycles
Intervals of expansion and recession in economic activity
Stock of capital(K)
Fundamental resource of an economy
Marginal efficiency of capital
The annual extra income yielded by an increase in capital stock, relative to the cost of said capital
MEC=∆Y/∆K=∆Y/I
Potential economic growth equation
=Fraction of GDP allocated to new investment * MEC