Chapter 2 Mankiw

Front 1

GDP

Back 1

Gross Domestic Product

Front 2

Gross Domestic Product (GDP)

Back 2

Nation's total income and total expenditure on its output of goods and services

Front 3

CPI

Back 3

Consumer Price Index

Front 4

Consumer Price Index (CPI)

Back 4

Level of prices

Front 5

Unemployment rate

Back 5

Fraction of workers unempoyed

Front 6

National Income Accounting

Back 6

accounting system used to measure GDP and related stats

Front 7

Stock

Back 7

quantity measured at a given time

Front 8

Flow

Back 8

Quantity measured per unit of time

Front 9

Used Goods relative to GDP

Back 9

Not included in GDP

Front 10

Inventories Relative to GDP

Back 10

Increase in inventory is counted as expenditure by the firm owners--counts towards GDP. However sale of inventory does NOT count.

Front 11

Value Added

Back 11

Way of calculating GDP--equals the value of the firms output less the value of the intermediate goods that the firm purchases

Front 12

Imputed Value

Back 12

Estimated value of goods without market prices--housing has an imputed value.

Front 13

Problems with GDP

Back 13

No way of accounting for underground activity
Doesn't account for inflation (if P or Q rises GDP still rises)

Front 14

Nominal GDP

Back 14

Value of goods and services measured at current prices

Front 15

Real GDP

Back 15

Value of goods and services measured using a constant set of prices

Front 16

GDP Deflator

Back 16

Nominal GDP/Real GDP
GDP deflator reflects what's happening to the overall prices of the economy.

Front 17

Chain-weighted Deflators

Back 17

Deflators of GDP in which the base year changes continuously

Front 18

National Income Accounts Identity

Back 18

Catagories which dollars of GDP fall into:
Consumption, Investment, Government purchases, net exports

Front 19

C
(the variable)

Back 19

Consumption

Front 20

Consumption

Back 20

Goods bought by households.

Front 21

Nondurable Goods

Back 21

Last a short time.
Ex: Food, clothing
Type of Consumption

Front 22

Durable Goods

Back 22

Last a long time.
Ex: Cars, TV
Type of Consumption

Front 23

Services

Back 23

Services rendered for money.
Type of Consumption

Front 24

Investment

Back 24

Goods bought for future use

Front 25

Business Fixed Investment

Back 25

Purchase of new plant and equipment by firms.
Type of investment

Front 26

Residential investment

Back 26

Purchase of new housing by households and landlords
Type of investment

Front 27

Inventory investment

Back 27

Increase in firms' inventories of goods. If inventory is falling, inventory investment is negative.

Front 28

G
(The variable)

Back 28

Government Spending

Front 29

I
(The variable)

Back 29

Investment

Front 30

NX
(The variable)

Back 30

Net Exports

Front 31

Government Purchases (G)

Back 31

Goods and services bought by federal, state and local governments.
Ex: Military, highways, government workers

Front 32

Net Exports

Back 32

Value of goods and services exported to othr countries minus the value of goods and services foreigners provide us.

Front 33

GNP

Back 33

Gross National Product

Front 34

Gross National Product (GNP)

Back 34

Total income earned by nationals
GNP=GDP+Factor Payments from Abroad- Factor Payments from Abroad

Front 35

NNP

Back 35

Net national product

Front 36

Net National Product (NNP)

Back 36

GNP-Depreciation

Front 37

Consumption of Fixed Capital

Back 37

Depreciation in national income accounts, equal to 10% of GNP

Front 38

Depreciation

Back 38

Losing value over time

Front 39

National Income

Back 39

NNP-Indirect Business Taxes
Measures how much everyone in the economy has earned.

Front 40

Five Catagories of National Income

Back 40

Compensation of Employees, Proprietors' Income, Rental Income, Corporate Profits, Net Interest

Front 41

Compensation of Employees
(As part of National Income)

Back 41

70%--Wages and fringe benefits earned by workers

Front 42

Proprietors' Income
(As part of National Income)

Back 42

9%--Income of noncoprorate businesses, such as small farms, mom and pop stores, law partnerships

Front 43

Rental Income
(As part of National Income)

Back 43

2%--Income that landlords receive including imputed rent that homeowners pay themselves, less expenses such as depreciation

Front 44

Corporate Profits
(As part of National Income)

Back 44

12%--The income of coporations after payments to their workers and creditors

Front 45

Net Interest
(As part of National Income)

Back 45

7%--The Interest domestic businesses pay minus the interest they receive plus interest earned from foreigners

Front 46

Personal Income

Back 46

National income
-Corporate Profits
-Social insurance contributions
-net interest
+Dividends
+Government Transfers to Ind.
+Personal interest Income

Front 47

Disposable Personal Income

Back 47

Amount households and noncoporate businesses have available to spend after satisfying their tax obligations to government.
=Personal income-Personal tax and nontax payments

Front 48

Laspeyres Index

Back 48

Fixed basket, tends to overstate cost of living because it does not take into account substitute goods

Front 49

Paasche Index

Back 49

Changing basket, understates increase in cost of living because it does not reflect reduction in welfare that would hve come from more expensive goods

Front 50

Problems with CPI and Inflation

Back 50

~Does not allow for substitute goods to be accounted for
~New goods raise real value of $ because there are more options but CPI does not take it into account
~Does not account for change in quality

Front 51

Labor Force Participation Rate

Back 51

labor force/adult population*100

Front 52

Labor Force

Back 52

Sum of empoyed and unemployed

Front 53

Discouraged Worker

Back 53

Worker no longer seeking employment, not counted as part of labor force

Front 54

Unemployed

Back 54

Doesn't have a job but wants one

Front 55

Okun's Law

Back 55

Higher rate of unemployment leads to a decrease in GDP