Unit 3 Part 4 Quiz Flashcards
WHY DO WE MEASURE GROWTH?
BECAUSE OF THE GREAT DEPRESSION. ECONOMISTS FELT IT WAS IMPORTANT TO MEASURE TO PREDICT AND PREVENT FUTURE ECONOMIC DOWNTURNS
NIPA
NATIONAL INCOME AND PRODUCT ACCOUNTS
WHAT DOES NIPA DO?
COLELCTS DATA ON PRODUCTION, INCOME, INVESTMENT, AND SAVINGS
WHO IS NIPA MAINTAINED BY?
THE DEPARTMENT OF COMMERCE
WHAT IS NIPA DATA USED FOR?
THE DATA IS REPORTED AND USED TO INFLUENCE GOVERNMENT POLICY
GDP OR GROSS DOMESTIC PRODUCT
THE DOLLAR VALUE OF ALL FINAL GOODS AND SERVICES PRODUCES WITHIN A COUNTRY’S BORDERS IN A GIVEN YEAR
WHAT IS A FINAL GOOD?
FINAL GOODS ARE THOSE SOLD TO CUSTOMERS
WHAT WAS THE GDP OF U.S IN 2020?
21.43 TRILL
PER CAPITA GDP
GDP DIVIDED BY A COUNTRY’S POPULATION
WHAT DOES PER CAPITA GDP DO?
MEASURES THE AVERAGE INCOME PER PERSON IN A COUNTRY
EX: OF PER CAPITA GDP
If a country’s GDP is $10 trillion and it has 250 million people, the per capita GDP is
$40,000
INTERMEDIATE PRODUCTS
GOODS USED TO MAKE OTHER PRODUCTS ARE NOT COUNTED
SECONDHAND SALES
TRANSACTIONS INVOLVING USED GOODS ARE EXCLUDED
NON- MARKET TRANSACTIONS
ACTIVITIES LIKE HOUSEHOLD CHORES OR VOLUNTEER WORK ARE NOT PART OF GDP
UNDERGROUND ECONOMY
ILLEGAL OR UNREPORTED ACTIVITIES ARE NOT INCLUDED
WHAT DOES GDP MEASURE WITHIN?
A NATIONS BORDERS!!
GDP DOES NOT INCLUDE:
PRODUCTS MADE BY A US COMPANY OVERSEAS.
- A CAR MADE IN THE US BY TOYOTA (JAPANESE COMPANY)
NOMINAL GDP
GDP MEASURES IN CURRENT PRICES
- DOES NOT ALWAYS MEASURE AN INCREASE IN OUTPUT
REAL GDP
REAL GDP IS MEASURED BY CALCULATING GDP WITH CONSTANT PRICE
NONMARKET ACTIVITIES
GDP DOES NOT MEASURE GOODS AND SERVICES THAT PEOPLE MAKE OR DO THEMSELVES, SUCH AS CARING FOR CHILDREN, MOWING LAWNS, OR COOKING DINNER
THE UNDERGROUND ECONOMY
THERE IS MUCH ECONOMIC ACTIVITY WHICH, ALTHOUGH INCOME IS GENERATED, NEVER REPORTED TO THE GOVERNMENT, EX: BLACK MARKET TRANSACTIONS, AND UNDER THE TABLE WAGES
NEGATIVE EXTERNALITIES
UNINTENDED ECONOMIC SIDE EFFECTS, SUCH AS POLLUTION,HAVE A MONETARY VALUE THAT IS OFTEN NOT REFLECTED IN GDP
QUALITY OF LIFE
ALTHOUGH GDP IS OFTEN USED AS A QUALITY OF LIFE MEASUREMENT, THERE ARE FACTORS NOT COVERED BY IT. THESE INCLUDE LEISURE TIME, PLEASANT SURROUNDINGS, AND PERSONAL SAFETY
INFLUENCES ON GDP
- AGGREGATE SUPPLY
- AGGREGATE DEMAND
AGGREGATE SUPPLY
THE TOTAL AMOUNT OF GOODS AND SERVICES AVAILABLE IN AN ECONOMY AT ALL PRICE LEVELS
AGGREGATE DEMAND
THE TOTAL AMOUNT OF GOODS AND SERVICES DEMANDED IN AN ECONOMY AT ALL PRICE LEVELS
IS IT ACCURATE?
- MANY THINGS TO CALCULATE IN GDP AND MUCH IS MISSED OR OVERLOOKED
- IT DOES PROVIDE A BASELINE
- MEASUREMENT NOT ACCURATE BUT CONSTANT
GNP OR GROSS NATIONAL PRODUCT
GNP measures the total income earned by a country’s residents, regardless of where they are
located
SUB CATEGORIES OF GDP
- NET NATIONAL PRODUCT
-NATIONAL INCOME - PERSONAL INCOME
- DISPOSABLE PERSONAL INCOME
NET NATIONAL PRODUCT (NNP)
deducts depreciation (wear and tear on assets) from GNP
NATIONAL INCOME (NI)
the total income earned by individuals and businesses in a country
PERSONAL INCOME
income received by individuals, including transfer payments.
DISPOSABLE PERSONAL INCOME
PI minus taxes, representing the income people have
available for spending.
ECONOMIC SECTOR
a big group or category that groups together
businesses and activities based on what they do. It helps us understand how different parts
of the economy work
EXAMPLES OF ECONOMIC SECTORS
- CONSUMER SECTOR
- INVESTMENT SECTOR
- GOVERNMENT SECTOR
- FOREIGN SECTOR
CONSUMER SECTOR
Higher GDP and income mean more money for consumers
to spend, boosting demand for goods and services.
INVESTMENT SECTOR
Businesses use GDP data to plan investments. High GDP can signal
growth opportunities
GOVERNMENT SECTOR
Government uses GDP for economic planning, taxation, and budgeting
FOREIGN SECTOR
High GDP can attract foreign investments and influence exchange rates.
GNP
“THE FLIP SIDE OF THE COIN OF GDP”
