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22 Cards in this Set

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  • Back
What is gross domestic product?
the most widely reported measure of a nation’s economic performance
What does GDP measure?
The market value of all final goods and services produced in a nation during a period of time, usually a year
What is gross national product (GNP)?
GNP measures the market value of all final goods and services produced by a nation’s residents, no matter where they are located
What is an advantage of using GDP?
GDP measures value using dollars, rather than a list of the number of goods and services
Does GDP measure secondhand transactions?
No, Current GDP does not include the sale of a used car or the sale of a home constructed some years ago
What are intermediate goods?
Goods and services used as inputs for production of final goods
Does GDP count intermediate goods?
No, to avoid double counting, GDP only measures final goods and services
Does GDP measure nonproductive financial transactions?
No, GDP does not count purely private or public financial transactions such as giving gifts, stocks, bonds, or transfer payments
What is a transfer payment?
A government payment to individuals, not in exchange for goods or services currently produced
What leakages are present in the circular flow of economic activity?
Household saving
Household taxes paid
Income spent on imports
What injections are present in the circular flow of economic activity?
Business spending
Government spending
Foreign spending
What are the two approaches we use to measure GDP?
Expenditure
Income
What is the expenditure approach for measuring GDP?
The national income accounting method that measures GDP by adding all the spending for final goods and services
What is the income approach for measuring GDP?
What is the expenditure approach for measuring GDP?
What are the four sectors of GDP?
GDP = C + I + G + (X - M)

Consumption
Investment
Government
Foreign (X - M)
What are the Income components of GDP?
GDP = Compensation of employees + rents + profits + net interest + nonincome adjustments
What is depreciation?
An allowance for the capital worn out producing GDP
What are indirect business taxes?
Taxes levied as a percentage of the prices of goods sold and therefore become a part of the revenue received by firms
What are the 5 shortcomings of GDP?
Nonmarket transactions
Distribution, kind, & quality of products
Neglect of leisure time
Underground economy
Economic bads
How do you arrive at NDP (Net Domestic Product)?
GDP minus depreciation of the capital worn out in producing output
What is "real" GDP?
The value of all final goods produced during a given time period based on the prices existing in a selected base year
What is a chain price index? What are the 2 most commonly used price indices?
A measure that compares changes in the prices of all final goods during a given period to the prices of those goods in a base year.

CPI (Consumer Price Index)
Personal Consumption Implicit Price Deflator