Measuring A Nation's Income Flashcards
What is Microeconomics
Microeconomics is the study of individuals, households, and firms’ behaviour in decision making and allocation of resources.
What is Macroeconomics
Macroeconomics is the branch of economics that studies the behaviour and performance of an economy as a whole.
What is GDP (Gross Domestic Product)
GDP isthe standard measure of the value added to the production of goods and services in a country during a certain period.
For an economy as a whole, income must equal expenditure.
A. True
B. False
True
GDP is a measure of both aggregate demand and aggregate income generated within a country during a period of time.
A. True
B. False
Households are buyers, and firms are sellers in the markets for goods and services.
A. True
B. False
True
Firms are buyers and households are sellers in the markets for the factors of production.
A. True
B. False
True
Households buy goods and services from firms, and firms use revenue from sales to pay wages to workers, rent to landowners, and profit to firm owners.
A. True
B. False
True
GDP equals the total amount spent by households in the market for goods and services.
A. True
B. False
True
Goods and services sold to foreign countries are exports. Goods and services purchased from a buyer’s domestic market of foreign manufactured goods are imports.
A. True
B. False
True
What two things does GDP measure
GDP can measure two things at once because they are two sides of the same coin. When a good or service is produced and sold, it generates income for someone(either the producer, the workers, or the owners of the company. So, adding up the value of all goods and services produced, it is also measuring the total income earned.
The components of GDP are Y = C + I +G + NX
A. True
B. False
True
What are the four components of expenditure
- Consumption
- Government spending
- Investment
- Net exports
What does it mean when net exports have a negative value
When net exports have a negative value, it means a country’s total value of exports is less than its total value of imports.
Nominal gdp is the production of goods and services valued at current prices.
A. True
B. False
True
Real gdp is the production of goods and services valued at constant prices.
A. True
B. False
True
What is Real GDP
Real GDP is the total value of all final goods and services in the economy during a given year, calculated using the prices of a selected base year.
Real GDP is expressed in base-year prices.
A. True
B. False
True
What is a GDP Deflator
The GDP deflator is a tool that measures the gross domestic product (GDP) affected by the change in the price of the products and goods rather than the output of an economy.
GDP Deflator is a measure of the price level calculated as the ratio of nominal gdp to real gdp times 100
A. True
B. False
True
The GDP Deflator formula = Nominal gdp/Real gdp x 100
A. True
B. False
True
What is inflation
Inflation is the rate of an increase in prices of goods over a given period of time in the economy.
What is Nominal GDP
Nominal GDP is 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.
What is an Inflation rate
The inflation rate is the per cent change per year in a price index, typically the consumer price index.
Why should policymakers care about GDP?
Policymakers should care about GDP because it is a key dictator of the economic health of a country. It is often used as a measure of standard of living, and it informs policy decisions.
