Principles of Economics chapter 7 Flashcards
What does the national income and product accounts/ national accounts keep track of
The national income and product accounts, or national accounts, keep track of the flows of money between different sectors of the economy.
What are the government purchases of goods and services
Government purchases of goods and services are total expenditures on goods and services by federal, state, and local governments.
What is consumer spending
Consumer spending is household spending on goods and services.
What is investment spending
Investment spending is spending on productive physical capital — such as machinery and construction of buildings — and on changes to inventories.
What are imports and exports
Goods and services sold to other countries are exports. Goods and services purchased from other countries are imports.
What are final goods and services
Final goods and services are goods and services sold to the final, or end, user.
What are intermediate goods and services
Intermediate goods and services are goods and services — bought from one firm by another firm — that are inputs for production of final goods and services.
What is the Gross Domestic Produduct/ GDP
Gross domestic product, or GDP, is the total value of all final goods and services
produced in the economy during a given year.
What is aggregate spending
Aggregate spending, the sum of consumer spending, investment spending, government purchases of goods and services, and exports minus imports, is the total spending on domestically produced final goods and services in the economy.
What are the 3 ways of calculating GDP
- Survey and add up total value of all final goods and services produced.
- Add up aggregate spending on all domestically produced goods and services in the economy.
- Add up the total factor income earned by households from firms in the economy.
What is the value added
The value added of a producer is the value of its sales minus the value of its purchases of intermediate goods and services.
What is aggregate output
Aggregate output is the economy’s total quantity of output of final goods and services.
What is the real GDP
Real GDP is 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.
What is the nominal GDP
Nominal GDP is the value of all final goods and services produced in the economy during a given year, calculated using the prices current in the year in which the output is
produced.
What is meant by chained dollars
Chained dollars is the method of calculating changes in real GDP using the average between the growth rate calculated using an early base year and the growth rate calculated using a late base year.
What is GDP per capita
GDP per capita is GDP divided by the size of the population; it is equivalent to the average GDP per person.
What is the aggregate price level
The aggregate price level is a measure of the overall level of prices in the economy.
What is a market basket
A market basket is a hypothetical set of consumer purchases of goods and services.
What is a price index
A price index measures the cost of purchasing a given market basket in a given year, where that cost is normalized so that it is equal to 100 in the selected base year.
What is the inflation rate
The inflation rate is the percent change per year in a price index — typically the consumer price index.
What is the Consumer Price Index/ CPI
The consumer price index, or CPI, measures the cost of the market basket of a typical urban American family.
What is the Producer Price Index
The producer price index, or PPI, measures changes in the prices of goods purchased by producers.
What is the GDP deflator
The GDP deflator for a given year is 100 times the ratio of nominal GDP to real GDP in that year.
