Week 1 Flashcards
What is GDP?
GDP (Gross Domestic Product) is the total market value of all final goods and services produced within a specific territory in a specific time period
What is GDP per capita
GDP divided by population
What is the national accounting identity
Y = C + I + G + NX Income = consumption + Investment + Government Purchases + (Imports - Exports)
What is the income approach to GDP
- Measure the sum of all incomes in an economy
- wages, salaries, Corporate profits etc.
What is Depreciation
- The deterioration of capital stock due to wear and tear
- GDP - Depreciation = Net Domestic Product
What share of GDP does labor comprise
Two thirds
What Share of GDP does Capital Comprise
One third
Which of the following does NOT increase the U.S. GDP?
a. The U.S.government purchases a tank from a U.S.company.
b. The U.S.government increases social security payments.
c. The U.S. government buys cars from a South Korean company.
d. The French government purchases a tank from a U.S.-based company
B, c
Formula For implicit GDP Price deflator
(Nominal GDP/ Real GDP) x 100
CPI Formula
(Cost of base year quantities at current prices / Cost of base year quantities at base year prices) x 100
What is an endogenous Variable
- One of the unknowns or outcomes of a model
- EG. The level of output in the Solow Model or the level of inflation in the short-run model
What is an exogenous variable
A component of an economic model that changes over time in an exogenous fashion
What is potential output
The amount of output an economy would produce if all factors were fully employed and all prices were completely flexible
Short-run definition
Several months up to two-years.
Long-run definition
More than several years
How to measure the state of the economy
Production = expenditure = income
What is included in GDP
- Goods and services that transact in markets
What is omitted from GDP
- the value of time
- Health of nation
- Changes in environmental resources
Economic profit definition
- Under perfect competition, Economic profit is equal to 0 as all revenue is paid out to factors of production
Trade Balance Definition
Net Exports. Exports - Imports
Capital Definition
Stock of machines, buildings, equipment etc.
Nominal GDP Formula
Nominal GDP = Price level x Real GDP
Inflation Rate
The percentage change in the aggregate price level of an economy
