National Income and the Standard of Living Flashcards
How do we measure national income?
Through output, expenditure and income
What is output?
The value of production of final goods of different industries in the economy
What is expenditure?
The spending of different sectors of the economy (C+I+G+X+M)
What is income?
The earnings in the economy
What are the issues with measuring national income?
Prices, inflation, population, domestic, gross and exchange rates
What is market price?
It is the price the consumer actually pays, after any taxes and subsidies
What is factor cost?
The actual cost of producing (incl. opportunity costs and normal profit)
What is the formula for expenditure at factor cost?
Expenditure at market prices - taxes + subsidies
What is nominal GDP?
GDP measured at current prices
What is real GDP?
GDP at constant prices, adjusted for inflation
What is GDP?
The market value of final products in an economy
What is a final product?
A consumption good, bought by its final user
What is an intermediate product?
Produced by one firms, bought by another firm and used as a component of a final product
What is domestic?
Produced within the boundaries of a country
What is economic growth?
The relative change in GDP
