Measurement and Structure of the National Economy Flashcards
What is the fundamental identity of national accounting?
The national income-expenditure identity
Y = total income = total expenditure
What is GDP?
Gross Domestic Product: market value of final goods and services newly produced within a nation during a fixed period of time
What is GNP?
Gross National Product: market value of final goods and services newly produced by people having a nationality during a fixed period of time
What is GDP per capita?
GDP per capita = GDP/population
What are the components of National Expenditure (Y)
Y = C + I + G + NX
What is wealth?
Assets - liabilities
What is the relation between savings and wealth?
As savings increase, weealth increases
=> positive relation
What equality can we get from the income-expenditure identity related to NX?
(X-M) = (S-I) + (T-G)
What are the components of National Income (Y)
Y = C + T + S
What can we draw from: (X-M) = (S-I) + (T-G)
If S=I, then X-M = T-G
Current account deficit = Fiscal deficit
Current account surplus = Fiscal surplus
=> The twin deficits phenomenon
What is Real GDP?
Constant price GDP using the prices of a base year and taking into account inflation
What is Nominal GDP?
Current price GDP
How do you calculate inflation Pi?
Pi(t) = (Pt - Pt-1)/Pt-1 *100
With P= overall price index
What are the three main price index?
i) Consumer Price Index
ii) Producer Price Index
iii) GDP Deflator (Nominal GDP/Real GDP)
What is interest rate?
Rate of return promised by the borrower to the lender
