Mod 10-11

Question 1

national income and product accounts (AKA national accounts)

Answer 1

keep track of the flows of money among different sectors of the economy

Question 2

Household

Answer 2

a person or group of people who share income

Question 3

firm

Answer 3

an organization that produces goods and services for sale

Question 4

product markets

Answer 4

where goods and services are bought and sold

Question 5

consumer spending

Answer 5

household spending on goods and services

Question 6

government spending

Answer 6

total expenditures on goods and services by federal, state and local governments

Question 7

factor markets

Answer 7

where resources, especially capital and labor are bought and sold

Question 8

taxes

Answer 8

required payments to the government

Question 9

tax revenue

Answer 9

total amount the government receives from taxes

Question 10

disposable income =

Answer 10

income+ gov. transfers- taxes; total amount of household income available to spend on consumption

Question 11

government transfers

Answer 11

payments that the gov. makes to individuals without expecting a good or service in return

Question 12

private savings=

Answer 12

disposable income - consumer spending; household’s disposable income not spent on consumption

Question 13

financial markets

Answer 13

channel private savings into investment spending and gov. borrowing

Question 14

government borrowing

Answer 14

amount of funds borrowed by the government in the financial markets

Question 15

investment spending

Answer 15

spending on new productive physical capital, such as machinery and structures, and on changes in inventories

Question 16

inventories

Answer 16

stocks of goods and raw materials held to facilitate business operations

Question 17

exports

Answer 17

goods and services sold to other countries

Question 18

imports

Answer 18

goods and services purchased from other countries

Question 19

Gross Domestic Product (GDP)

Answer 19

total value of all final goods and services produced in the economy during a given year

Question 20

expenditure approach

Answer 20

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

Question 21

income approach

Answer 21

adds up the total factor income earned by households from firms in the economy, including rent, wages, interest and profit

Question 22

value-added approach

Answer 22

surveys firms and adds up their contributions to the value of final goods and services

Question 23

final goods and services

Answer 23

goods and services sold to the final/end user

Question 24

intermediate goods and services

Answer 24

bought from one firm by another to be used as inputs into the production of final goods and services

Question 25

when is the circular flow at equilibrium?

Answer 25

income = spending

Question 26

terms that mean NOT adjusted for inflation

Answer 26

nominal, current, current dollar, regular, normal

Question 27

terms that mean ADJUSTED for inflation

Answer 27

real, constant dollar, constant price, constant, inflation corrected

Question 28

words that mean GDP

Answer 28

output = economic output = aggregate output = GDP

Question 29

aggregate output

Answer 29

the total quantity of final goods and services produced within an economy

Question 30

real GDP

Answer 30

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

Question 31

nominal GDP

Answer 31

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

Question 32

GDP per capita

Answer 32

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

Question 33

real GDP per capita

Answer 33

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

Question 34

why cant GDP be equivalent to quality of life?

Answer 34

-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