The Wealth of Nations ( National Income Accounting and GDP) Flashcards
Define a measurement Identity
Two magnitudes are related by a measurement identity when they are defined in a way that makes them equal
Give the National accounting identity
Dollar value of expenditures = Dollar value of payments received by sellers
State the important identity
Dollar value of goods and serviced nationally in the US = Dollar value of spending on goods and services = value of payments received by sellers of goods and services
State the issue with GDP
GDP only takes into account market activities.
Caring for your own child doesn’t count
State the three different ways to measure GDP
Production = Expenditure = Income
Describe the two way GDP is described
Flow - the amount produced per unit time
Stock - the total amount that people have at a given amount
State the identity for GDP
GDP = Consumer spending + Investments + Government purchases +(Exports - Imports)
State an example of Consumption
Someone buys a haircut or rice
State an example of Investment
Business buys a machine, business has unsold items
State an example of Government Spending
Buys a new highway or government pays a teacher
State an example of Exports
US farmer sells soybeans to Japan
State an example of Imports
US buys a Kia in Korea
State some of the measures of GDP
Expenditures of crime prevention ( prisons, police cars, locks)
Expenditures on equipment to control protest
Productive activities that have negative externalities such as pollution
State some limitations of GDP
Doesn’t take into account
Leisure
Childcare
Home production
Health, Happiness, political rights
