Midterm 1 Flashcards
3 main indicators of macro
real GDP
unemployment
inflation
3 approaches of national income accounting
product: dollar amount of output produced
expenditure: dollar amount spent by purchasers
income: dollar incomes earned by production
fundamental identity of national income accounting
total production = total expenditure = total income
production approach: definition of GDP
the current market value of all final goods and services newly-produced in the domestic economy during a specified period of time
things to remember about production approach
most non-market goods and services not included
value-added as net profit on a product
capital goods treated as final goods since they are not used up (inventories also as final goods)
expenditure approach: definition of GDP
the total spending on all final goods and services produced in the domestic economy during a specified period of time
consumption approach: definition of GDP
the total spending by domestic households on final goods and services
categories: consumption, investment, government purchases of goods and services, net exports
3 components of consumption
consumer durable goods (lifetime >= 3 years)
consumer nondurable goods (lifetime <=3 years)
services
income approach: definition of GDP
the total income earned by individuals and businesses in the economy
categories: compensation of employees, other income, corporate profits, depreciation, net factor income
5 different income measures in the income approach
national income
GDP
GNP
private disposable income
net government income
national income
compensation of employees + other income + corporate profits
GNP
national income + depreciation
GDP
GNP + net factor payments
GNP - net factor income
private disposable income
GDP + net factor income + transfer payments from government + interest payments on government debt - taxes
net government income
taxes - transfer payments - interest payments on government debt
nominal vs. real values
nominal variables measured in current dollar terms
real variables adjusted for changes in price
nominal GDP = price * real GDP
price index
the average level of prices for a specified set of goods and services relative to the prices in a specified base year
3 major price indices
the GDP deflator
the PCE deflator
CPI
3 major price indices
the GDP deflator
the PCE deflator
CPI
unemployment rate
percentage of civilian labour force willing and able to look for work, actively looking for work and are not currently employed
unemployed/labour force
participation rate
labour force/population
employment ratio
employed/population
labour force
employed + unemployed
interest rate
measures the cost of borrowing and the return to saving/lending
