Module 10 Flashcards
How economists use aggregate measures to track the performance of the economy
.
The circular flow diagram of the economy
.
What gross domestic product, or GDP , is and the three ways of calculating it
.
National Accounts
National income and product accounts, or national accounts: keep track of the flows of money between different sectors of the economy.
household
A household is a person or group of people who share income
firm
A firm is an organization that produces goods and services for sale
Product markets
are where goods and services are bought and sold.
Factor markets
are where resources, especially capital and labor, are bought and sold.
Consumer spending
is household spending on goods and services.
stock
A stock is a share in the ownership of a company held by a shareholder.
bond
A bond is a loan in the form of an IOU that pays interest.
Government transfers
re payments that the government makes to individuals without expecting a good or service in return.
Disposable income
equal to income plus government transfers minus taxes, is the total amount of household income available to spend on consumption and to save.
Private savings
equal to disposable income minus consumer spending, is disposable income that is not spent on consumption.
financial markets
The banking, stock, and bond markets, which channel private savings and foreign lending into investment spending,government borrowing, and foreign borrowing, are known as the financial markets.
Government borrowing
is the amount of funds borrowed by the government in the financial markets.
Government purchases of goods and services
are total expenditures on goods and services by federal, state, and local governments.
Exports
Goods and services sold to other countries are exports.
Imports
Goods and services purchased from other countries are imports.
Inventories
Inventories are stocks of goods and raw materials held to facilitate business operations.
Investment spending
is spending on new productive physical capital, such as machinery and structures, and on changes in inventories.
Final goods and services
are goods and services sold to the final, or end, user.
Intermediate goods and services are goods and services
bought from one firm by another firm to be used as inputs into the production of final goods and services.
Gross domestic product
or GDP , is the total value of all final goods and services produced in the economy during a given year.
Aggregate spending
the total spending on domestically produced final goods and services in the economy—is the sum of consumer spending (C), investment spending (I), government purchases of goods and services (G), and exports minus imports (X−IM).
value added
The value added of a producer is the value of its sales minus the value of its purchases of inputs.
Net exports
Net exports are the difference between the value of exports and the value of imports (X−IM).
Summary of what’s included and not included in GDP
Included: Domesitcally produced final g/s Capital goods New construction of structures Changes to inventories
Not Included Intermediate G/S Inputs Used goods Financial assets (stocks/bonds) Foreign produced goods and services
