Unit 2 Vocabulary

Question 1

keep track of the flows of money among different sectors of the economy

Answer 1

national income and product accounts or national accounts

Question 2

a person or group of people who share income

Answer 2

household

Question 3

an organization that produces goods and services for sale

Answer 3

firm

Question 4

goods and services are bought and sold here

Answer 4

product markets

Question 5

household spending on goods and services

Answer 5

consumer spending

Question 6

where resources, especially capital and labor, are bought and sold

Answer 6

factor markets

Question 7

total expenditures on goods and services by federal, state, and local governments

Answer 7

government spending

Question 8

required payments to the government

Answer 8

taxes

Question 9

the total amount the government receives from taxes

Answer 9

tax revenue

Question 10

equal to income plus government transfers minus taxes, is the total amount of household income available to spend on consumption

Answer 10

disposable income

Question 11

payments that the government makes to individuals without expecting a good or service in return

Answer 11

government transfers

Question 12

equal to disposable income minus consumer spending, is a household’s disposable income that is not spent on consumption

Answer 12

private savings

Question 13

channel private savings into investment spending and government borrowing

Answer 13

financial markets

Question 14

the amount of funds borrowed by the government in the financial markets

Answer 14

government borrowing

Question 15

spending on new productive physical capital, such as machinery and structures, and on changes in inventories

Answer 15

investment spending

Question 16

stocks of goods and raw materials held to facilitate business operations

Answer 16

inventories

Question 17

goods and services sold to other countries

Answer 17

exports

Question 18

goods and services purchased from other countries

Answer 18

imports

Question 19

the total value of all final goods and services produced in the economy during a given year

Answer 19

GDP

Question 20

adds up aggregate spending on domestically produced final goods and services in the economy-the sum of consumer spending, investment spending, government purchases of goods and services, and exports minus imports

Answer 20

expenditure approach

Question 21

adds up the total factor income earned by households from firms in the economy, including rent, wages, interest, and profit

Answer 21

income approach

Question 22

surveys firms and adds up their contributions to the value of the final goods and services

Answer 22

value added approach

Question 23

goods and services sold to the final, or end, user

Answer 23

final goods and services

Question 24

goods and services bought from one firm by another firm to be used as inputs into the production of final goods and services

Answer 24

intermediate goods and services

Question 25

the difference between the value of exports and imports (X - M)

Answer 25

net exports

Question 26

added by a producer is the value of its sales minus the value of its purchases of inputs

Answer 26

value added

Question 27

the total quantity of final goods and services produced within an economy

Answer 27

aggregate output

Question 28

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 in order to remove the effects of price changes

Answer 28

Real GDP

Question 29

the total value of all final goods and services produced in the economy during a given year, calculated with the prices current in the year in which the output is produced

Answer 29

nominal GDP