Week one learning Flashcards
What does gross domestic product (GDP) measure?
GDP measures the total income of everyone in the economy.
What is Gross National Product (GNP)?
GNP is the market value of all final goods and services produced by a nation’s permanent residents within a given period of time
Nalah pays James $50 to mow her lawn. What happens to GDP?
GDP increases by $50.
What happens to GDP if Nalah and James were married?
GDP decreases by $50 because the service is not part of a market transaction.
What contributes more to GDP: 1 kg of mince or 1 kg of king prawns?
1 kg of king prawns, as it is more expensive.
What are the four components of GDP?
Consumption (C), Investment (I), Government Purchases (G), and Net Exports (NX).
What is the formula for GDP?
Y = C + I + G + NX.
What does Consumption (C) include?
Spending by households on goods and services, excluding new housing.
What is included in Investment (I)?
Spending on business capital, residential capital, and inventory accumulations, excluding financial assets like stocks and bonds.
What do Government Purchases (G) exclude?
Transfer payments such as Social Security or unemployment benefits.
How is Net Exports (NX) calculated?
Exports minus imports
How are income and expenditure related in the economy?
Every dollar spent by a buyer is a dollar of income for the seller, meaning income equals expenditure.
What is the circular flow diagram?
A model that illustrates GDP as spending, revenue, factor payments, and income in the macroeconomy.
What is the difference between Nominal GDP and Real GDP?
Nominal GDP values goods and services at current prices, while Real GDP is adjusted for inflation and measured at constant prices.
What is the GDP deflator?
A measure of the price level, calculated as the ratio of nominal GDP to real GDP times 100.
