Unit 3 Flashcards
GDP stands for:
gross domestic product
What is GDP
A measure of all final goods & services made within a countries boarders over the year.
What is capital
Higher standard of living
How to calculate nominal GDP
Price x Quantity
How to calculate GDP per capita
GDP/Population
What does C+I+G+ stand for
- consumption
- GDP investment
- Government spending
- exports - imports
What type of goods are counted in GDP
Only new finished goods & services
What type of goods do no count in GDP
- underground economy (off the books)
- Transfer Payments (social security & welfare
- investment goods
What is the Value Added Approach to GDP
Measures the final goods/service purchased minus the cost of intermediate goods.
Ex:
- Car costs 30k
- Parts cost 20k
- Value Added 10k
What is the Income Approach to GDP?
The sum of National Income + Depreciation + Indirect Business Tax + Net Foreign Factor
National income:
all the ways money is made - business profits, wages, rents, insurance, interest
Depreciation:
A monetary measurement of how much value was lost on existing capital - machinery loses value the more it is used
Indirect Business Tax:
is sales tax on goods sold in the product market
Net Foreign Factor:
is a measurement of goods sold in a country made by foreign businesses operating there. Toyota is a Japanese company that makes a lot of cars in the U.S.
