Krugman Textbook Chapter 7 Flashcards
National Income and Product Accounts (National Accounts)
A method of calculating and keeping track of the different flows of money between different sectors of the economy, such as a consumer and investment spending, or government purchases.
Consumer Spending (Consumption)
This is household spending on goods and services from domestic and foreign firms.
Stock
A share in the ownership of a company held by a shareholder.
Bonds
A legal document based on borrowing in the form of an IOU that pays interest.
Government Transfers
These are payments that government makes to you where to don’t need to trade something back.
Disposable Income
The total amount of household income available to spend on consumption and save, after government transfers have been added and taxes have been deducted.
Private Savings
Disposable income that goes into financial markets, such as a bank, to be saved for later use instead of spent immediately on goods and services.
Financial Markets
These are banking, stock, and bond markets that channel private savings and foreign lending into investment spending, government borrowing, and foreign borrowing.
Government Borrowing
The total amount of funds borrowed by federal, provincial, and local governments in financial markets to buy goods and services.
Government Purchases of Goods and Services
The total purchases by federal, provincial, and local governments on goods and services.
Inventories
Stocks of goods and raw materials held to facilitate business operations.
Investment Spending (Investment)
The spending on productive physical capital, such as machinery or construction of buildings, and on changes to inventories.
Final Goods and Services
These are goods and services sold to the final, or end, user.
Gross Domestic Product (GDP)
The total value of all final goods and services produced in the economy during a given period, usually a year.
Aggregate Expenditure
The sum of consumer spending, investment spending, government purchases of goods and services, exports minus imports is the total spending on domestically produced final goods and services in the economy.
Value Added
The value of a producer’s sales minus the value of its purchases of intermediate goods and services.
Factor Incomes
Incomes earned by factors of production, which include wages, interest, rent, dividends, and profits.
Non-Factor Payments
The difference between the prices paid for final goods and services and the amount received by factors of production, which include net indirect taxes and capital depreciation.
Net Exports
The difference between the value of exports and the value of imports. You have a positive net export when you export more goods than you import, and you have a negative net export when you import more goods than you export.
Aggregate Output
The total quantity of final goods and services the economy produces for a given time period, usually a year. Real GDP is the numerical measure of aggregate output typically used by economists.
Real GDP
The total value of all final goods and services produced in the economy during a year, calculated using the prices of selected base year.
Nominal GDP
The value of all final goods and services produced in the economy during a given year, calculated using the current prices in the year in which the output is produced.
Chained Dollars
Method of calculating real GDP using the average between the growth rate calculated using an early base year and the growth rate calculated using a late base year.
GDP per Capita
GDP divided by the size of the population; equivalent to average GDP per person.
Aggregate Price Level
A single number that represents the overall price level for final goods and services in the economy.
Market Basket
A hypothetical consumption bundle of consumer purchases of goods and services, used to measure changes in the overall price level.
Price Index
A measure of the cost of purchasing a given market basket in a given year, where the cost is normalized so that it is equal to 100 in the selected base year; a measure of overall price level.
Inflation Rate
The annual percent change in a price index, typically the consumer price index. The inflation rate is positive when the aggregate price level is raising (inflation) and negative when the aggregate price level is falling (deflation).
Consumer Price Index (CPI)
A measure of prices, calculated by surveying market prices for a market basket intended to represent the consumption of a typical Canadian family. The most commonly used measure of prices in Canada.
Industrial Producer Price Index (IPPI)
An index that measures the changes in prices of goods purchased by producers.
GDP Deflator
A price measure for a given year that is equal to 100 times the ratio of nominal GDP to real GDP in that year.
