Lecture 7 the Size of the Economy Flashcards
1
Q
GDP
A
value of final goods produced within the country, economy’s size, equal to aggregate expenditure
2
Q
aggregate expenditure
A
all flows into the market for goods and services within a country
3
Q
national income
A
payments to factors of production within the country (labor, capital, land)
4
Q
nominalGDP =
A
consumption+investment+government expenditure+net exports
5
Q
realGDP
A
total value of production at fixed prices
6
Q
Paasche/GDP deflator =
A
PtQt/(PbaseQt)
nGDP/rGDP
understates inflation
7
Q
Laspeyres/CPI
A
PtQbase/(PbaseQbase)
overstates inflation because it uses base quantites, which consumers will consume less than as prices rise
