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ECON 203 > Topic 4_ Measuring Total Production > Flashcards

Topic 4_ Measuring Total Production Flashcards

1
Q

Micro vs Macro

Income
Output
Spending

A

Micro:
-One person’s income
-What a firm produces
-Individual spending, or house spending, or girms spending

Macro:
-Total income of whole ocuntry
-Total output of all firms
-Total spending from all houses, govt, and firms

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2
Q

GDP

A

THE MARKET VALUE OF ALL FINAL GOODS AND SERVICES PRODUCED IN A COUNTRY DURING A PERIOD OF TIME

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3
Q

THE MARKET VALUE OF ALL FINAL GOODS AND SERVICES PRODUCED IN A COUNTRY DURING A PERIOD OF TIME

A

THE MARKET VALUE OF ALL FINAL GOODS AND SERVICES PRODUCED IN A COUNTRY DURING A PERIOD OF TIME

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4
Q

What period of time is gdp usually measured in

A

one year

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5
Q

Why do we consider the MARKET VALUE of goods in gdp

A

because we need to know the dollar value of a g/s

UNIFROM UNIT

we cant sum the quantity of haircuts and nail clippers and cars?? bc it dont make sense

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6
Q

How is market value calculated

A

makret prices

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7
Q

What 3goods does gdp not account for

A

Barter an unpaid
underground econ

INTERMEDIATE GOODS HSAWDUAWYF;O8EFYOIEHSRO;GWIE

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8
Q

What is a final good and why is only this used in gdp

A

FINAL GOOD: BOUGHT TO CONSUME/USE coompletely

we do not count intermediate goods that are used as input in production because we do not want ot double count

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9
Q

What year is a good counted in when considering GDP

A

WE CARE ABOUT WHEN THE GOOD IS PRODUCED NOT WHEN IT IS SOLD!!!!!

CUrrent production is also counted

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10
Q

Does it matters wo produces the good in a country in ggdp

A

NO! citizens foreigners none of it matters all that matters is that it is produced in a country

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11
Q

Basic GDP market value calculation

A

(Price x Quantity of Good 1)+(Price x Quantity of Good 2) = GDP

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12
Q

4 Ways of measuring gdp

A
  1. market value method
  2. total income sum method
  3. sum of value added method
  4. total spending/expenditure method
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13
Q

Market value of all FINALLL g and s- GDP measuring method

A

Price x Quantity of each good summed up

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14
Q

Sum of total incomes (WRIP) method of calc GDP

A

GDP can be measured by the total income (Wages, rent, interest and profits) recieved by HOUSEHOLDS

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15
Q

Sum of Val added method of calc GDP

what is value added?
what is the idea?
what is the formula?
QUIRK!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

A

VALUE ADDED: extra market value a firm gives a product

DIFFERENCE BETWEEN WHAT A FIRM BOUGHT THE (intermediate) GOOD FOR and the price it sells it for

VAL ADDED= VAL OF PRODUCTION- VAL OF INTERIM GOOD

QUIRK:: look at each firm individually!! do even the intermediate goods have intermediate good? each get own formula application

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16
Q

Total Spending/Expenditure approach calc gdp

A

GDP can be emasured by total spending on g/d by households, firms, govt, and world

17
Q

4 components of GDP

A

C+I+G+X-Q
C+I+G+NX

Consumption : spending by households on g/s
Investment: purchase of capital by firms
Government spending: govt spending on consumption goods and capital
Net Exports: spending by rest of the world (EXPORTS-IMPORTS)

X= IMPORTS
Q=IMPORTS

18
Q

Investment- 3 types, inventory formula

A

spending by firms on capital (goods that will be used in the future to produce more goods)

non-residential (machines, tools)
residential (factories, offices)
inventroy (goods produced but not sold yet)

INVENTORY= PRODUCTION- SALES

19
Q

Consumption
-what’s a durable good

A

spenidng on goods and services

even “DURABLE” goods, long lasting goods like washing machines

20
Q

Inventory formula+ meaning

A

Inventory= Production- Sales

Positive #: Inventory investment positive
Negative #: Invenotry investment negative

21
Q

Government Spending

WHAT DOES THIS NOT INCLUDE

A

total spednign by all branches of government

DOES NOT INCLUDE GOVT SPENDING THAT DOESNT PRODUCE NEW GOOD OR SERVICE (dont include govt transfers/EI/social program)

22
Q

Net Exports (X-Q)

A

Exports-Imports

exports: g/s produced in caanada that will be consumed by people in other countries
Imports: g/d produced outside canada that consumed domestically

Exports> Imports Trade surplus
Exports< Imports Trade deficit

23
Q

Gross National Income (GNI)

A

value of incomes recieved by Canadians regardless of where they were located

(Canadians working in foregin countries)
(canadian business operating overseas)

24
Q

GNI formula

A

GNI= GDP + income recieved by Canadians outside Canada - income recieved by foreginers in canada

25
Q

shortcomings of gdp

A

household production
underground econ
barter transactions and unpaid labour

26
Q

household production

A

g/d people produce for thesemlves

undergroun econ: black market

barter/unpaid: services that people prodive for in-kind paymentrs or for free

27
Q

why is gdp not a perfect measure of well being

A

DOES NOT INCLUDE LEISURE VALUE
not adjusted for pollution or negative effect of production
IGNORED HOW INCOME IS DISTRIBUTED

28
Q

Growth rate formula

A

Last-First/First x 100

29
Q

HOw to get average growth rate

A

get growth rate of every year

average out the growth rates

30
Q

Rule of 70

A

of years to double value = 70/ annual growth rate

how many years will it take to double the value

31
Q

REAL gdp vs Nominal gdp

A

Nominal gdp: value of final goods and services evaluated at current year prices

INCREASES OVER TIME DUE TO PRICE/ PRODUCTION INCREASE

Real: value of final goods services calculated at base-year prices!!

32
Q

Why is nominal gdp not the best,

A

nominal gdo comes from the (PxQ) formula, so if Pp or Q goes up then nominal gdp also goes up!!!!!!!! easily affected

33
Q

why is real gdp the best

A

by keepign prices constatn, changes in real gdp represent the chang ien the quantity of g/s producedi n economy

as long as you have one constant base year then every growth rate will be the same !!

you are fixing prices so only PRODUCTION CAN BE DIFFERENTTTTTTTTTTTT

34
Q

REAL GDP VS NOMINAL GDP MAIN DIFF

A

NOMINAL GDP: P x Q (neither is fixed)

REAL GDP: P x Q but P is fixed in base year!!!!

35
Q

MAJOR THING ABOUT EXPENDITURE APPROACH

A

CONSIDER WHEN THINGS ARE BOUGHT (bc this one is about spending)!!! instead of focusing when things are produced

36
Q

Why are transfer paymetns and social programs not included in Government spending

A

they add no value

37
Q

why do all 4 methods equal the same value of gdp

A

because of circular flow diagram!!! the money is the same it is jus moving hands

38
Q

When graphed on a line chart
-what does it mean when rela gdp is increasing!!!
-nominal gdp increasing
-when real gdp is higher than nominal
-when nominal and real gdp cross

A

=If real GDP is increasing CAN ONLY mean increase in production

=If nominal GDP is increasing COULD mean increase in production or prices

=If real GDP is higher than nominal GDP, means that Production is higher and Price is lower

=Nominal and Real GDP cross when it is the selected Base year

ECON 203 (16 decks)

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