Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Macroeconomics SEM 2 > Measuring Econ. Activity > Flashcards

Measuring Econ. Activity Flashcards

1
Q

Define GDP

A
  • Measures Total Income of the Economy

- Measures Total Expenditure on Economy’s Output of G+S

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Why must Income = Expenditure for an Economy as a whole?

A

Every Transaction has a Buyer + Seller

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What do Market Prices reflect?

A

Reflect the Value of Goods

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What does the GDP count in the measure?

A

Market Value of All Final G+S produced in a country in a given time period
All G+S Sold LEGALLY in Markets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What type of G+S are Excluded from GDP Measure?

A

Illicitly Sold G+S

G+S produced at Home

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the National Account Identity?

A

Y = C + I + G + NX

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Define Consumption

A

Spending by Households on G+S

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is NOT Included in Consumption?

A

New Housing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Define Investment

A

Spending on Capital Equipment, Inventories + Structures

–> Inventory Accumulation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is New Housing accounted under?

A

Investment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Define Gov. Spending

A

Gov. ConsumptionExpenditure + Gross Investment (Public)

Spending on G+S

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Who accounts for Gov. Spending?

A

Local + National Governments

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What does Gov. Spending NOT Include?

A

Does NOT Include Transfer Payments

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What are Net Exports?

A

Exports - Imports

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Define Exports

A

Spending on Domestically Produced G+S by Foreigners

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Define Imports

A

Spending on Foreign G+S by Domestic Residents

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Define GNP

A

Total Income earned by Citizens of a Nation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Who is include in GNP?

A

Income from Citizens Abroad

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Who is Excluded from GNP?

A

Income form Foreigners

20
Q

How is GNP Calculated?

A

GNP = GDP + Net Factor Income from Abroad

21
Q

What is NNP?

A

Net National Product

22
Q

How is NNP Calculated?

A

NNP = GNP - Depreciation

23
Q

Why is it Important to distinguish between Real + Nominal GDP?

A

A Rise in Total Spending may be due to Increased Inflation

–> Output has NOT actually Increased- just Prices

24
Q

Define Nominal GDP

A

Production of G+S valued at Current Prices of a given Base Year

25
Q

Define Real GDP

A

Production of G+S valued at Constant Prices of a given Base Year

26
Q

How is the GDP Deflator Calculated?

A

GDP Deflator = [Nominal GDP / Real GDP] x 100

27
Q

what are the main Limitations to the GDP Measure?

A
  1. Does NOT Account for Income Distribution- INEQUALITY
  2. Misses Value of Activity Outside Markets- Illicit + Home produced G+S
  3. Ignores Environmental Impact of Output
28
Q

Define Inflation

A

Rise in the Economy’s Overall Price Level

29
Q

Define Inflation Rate

A

% Change in Price Level from One Period to the Next

30
Q

What are the 2 main measures of Inflation?

A

CPI

PPI

31
Q

What does CPI Measure?

A

Overall Level of Prices

32
Q

How is CPI Calculated?

A
  1. Fix a Basket of Goods
  2. Record Prices at each Time Interval
  3. Find Cost of Basket + Measure Changes
  4. Choose a Base Year
  5. Compute Inflation Rate
33
Q

What is PPI?

A

Producer Price Index

34
Q

What does PPI Measure?

A

Cost of Basket of G+S bought by Firms

35
Q

What are the 4 main problems with CPI?

A
  1. Substitution Bias
  2. Intro of New Goods
  3. Unmeasured Quality Change
  4. Individual Spending Patterns may NOT be Typical
36
Q

Why is Substitution Bias a Problem for CPI?

A

Prices of G+S do NOT change proportionately

–> Consumers may Substitute to relatively less Expensive Goods that are NOT in the Fixed Basket

37
Q

Define GDP Deflator

A

Ratio of Nominal GDP : Real GDP

38
Q

What does GDP Deflator reflect?

A

Reflects Prices of ALL G+S produced Domestically

39
Q

What does GDP Deflator Compare?

A

Compares Prices of Currently Produced G+S to Price of same G+S in Base Year

40
Q

What do CPI/PPI reflect?

A

Reflects Prices of G+S bought by Consumers + Firms

41
Q

What does CPI/PPI Compare?

A

Compares Price of Fixed Basket of G+S to Price of Basket in Base Year

42
Q

What is the main issue with CPI/PPI?

A

Basket NOT Updated Automatically over time

43
Q

What is RPI + How is it Calculated?

A

Retail Price Index

RPI = CPI + Council Tax + Mortgage Interest Payments

44
Q

What’s the Main Difference between GDP Deflator + CPI?

A

CPI reflects Prices of Foreign Goods as well

  • e.g. Increased Oil Prices –> Greater Increase in CPI than in Deflator
  • -> Because Oil makes up larger proportion of Consumer Spending then of GDP
45
Q

How do you Account for Inflation?

A

Value of Today’s £ = Value in Year T £ x [Price Level Today / Price Level in Year T]

46
Q

What does Indexation reflect?

A

Reflects Real Purchasing Power at that Moment in Time

Macroeconomics SEM 2 (13 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions