GDP and GNP Flashcards
closed economy
does not engage in international trade
capital expenditure vs current expenditure
capital expenditure is the investment of capital goods (long term) (development expenditure)
current expenditure is the spending on goods for current consumption (wages & salaries) (short term)
Transfer payment
monies given to one group by another for which no productive activity took place. (social security)
real flows
the flow of goods & services and factor services
money flows
the flow of factor incomes from firms to households. And the flow of expenditure from households to firms.
leakages
savings, tax, and expenditure on import are leakages, or withdraws from the circular flow of money.
savings
consists of all income that is not consumed
disposable income
total personal income minus taxes
investment
the purchase of capital goods (goods used to produce other goods)
injections
additions to the circular flow of income (exports)
national income
a measure of economic activity in an economy over a given period, usually one year
Gross domestic product
a measure of output produced in a country over a given period, irrespective of whether the factors of production are locally owned or foreign owned
Gross national product
a measure of output over a given period, usually 1 yr, produced by the nationals of a country, irrespective if they are located in the country or not.
formula for market price
C + I +G (X-M)
plant defintion
firms are made up of plants. A plant is a production unit.
International sector
The international or foreign trade sector is made up domestic firms which purchase imports, and other domestic consumer of imports.
nominal output vs real output
nominal output is the level of output produced in a country for a given year, measured in prices for that year.
Real output is the level of output produced in a country for a given year, measured in prices for a BASE year.
potential output
the level of output that a country is capable of producing when all it factors of production are fully employed.
balanced budget
expenditure is EQUAL to revenue
budget deficit
expenditure EXCEEDS revenue, also called fiscal deficit
national DEBT
the SUM of government borrowing over the years that exceeds revenue
national BUDGET
a statement of government’s estimated revenue and expenditure for a country for the coming year.
budget surplus
revenue EXCEEDS expenditure
