Mod 10-11 Flashcards
national income and product accounts (AKA national accounts)
keep track of the flows of money among different sectors of the economy
Household
a person or group of people who share income
firm
an organization that produces goods and services for sale
product markets
where goods and services are bought and sold
consumer spending
household spending on goods and services
government spending
total expenditures on goods and services by federal, state and local governments
factor markets
where resources, especially capital and labor are bought and sold
taxes
required payments to the government
tax revenue
total amount the government receives from taxes
disposable income =
income+ gov. transfers- taxes; total amount of household income available to spend on consumption
government transfers
payments that the gov. makes to individuals without expecting a good or service in return
private savings=
disposable income - consumer spending; household’s disposable income not spent on consumption
financial markets
channel private savings into investment spending and gov. borrowing
government borrowing
amount of funds borrowed by the government in the financial markets
investment spending
spending on new productive physical capital, such as machinery and structures, and on changes in inventories
inventories
stocks of goods and raw materials held to facilitate business operations
exports
goods and services sold to other countries
imports
goods and services purchased from other countries
Gross Domestic Product (GDP)
total value of all final goods and services produced in the economy during a given year
expenditure approach
adds up aggregate spending on domestically produced final goods and services in the economy - the sum of consumer spending, investment spending, government purchases of goods and services, and exports minus imports
GDP = C + I + G +(X-M)
consumer spending, investment spending by firms, gov. purchase, net exports
income approach
adds up the total factor income earned by households from firms in the economy, including rent, wages, interest and profit
value-added approach
surveys firms and adds up their contributions to the value of final goods and services
final goods and services
goods and services sold to the final/end user
intermediate goods and services
bought from one firm by another to be used as inputs into the production of final goods and services
when is the circular flow at equilibrium?
income = spending
terms that mean NOT adjusted for inflation
nominal, current, current dollar, regular, normal
terms that mean ADJUSTED for inflation
real, constant dollar, constant price, constant, inflation corrected
words that mean GDP
output = economic output = aggregate output = GDP
aggregate output
the total quantity of final goods and services produced within an economy
real GDP
measures an economy’s growth with accuracy.
:the total value of all final goods and services produced in the economy during a given year, calculated using the prices of a selected base year in order to remove the effects of price changes
nominal GDP
is the total value of all final goods and services produced in the economy during a given year, calculated with the prices current in the year in which the output is produced
-nominal GDP (ofc both countries being compared have to have same currency unit of GDP) of a country can be an indicator of economy size
GDP per capita
is the total value of all final goods and services produced in the economy during a given year, calculated with the prices current in the year in which the output is produced
real GDP per capita
is the best indicator to compare two countries economy’s ignoring inflation and population
- ceteris paribus, a country with a larger population has a larger GDP
: (GDP / population size), equivalent to the avg.GDP per person
why cant GDP be equivalent to quality of life?
-does not include: leisure time volunteerism, housework, natural beauty
-does include: disease, divorce, crime, natural disasters
-is an indication of the economy’s potential for certain achievements
value of output = value of income
-theoretically a high GDP per capita would mean the country’s ability to afford high expenditures on health and education but it does not perfectly mean a higher quality of life
