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17 Cards in this Set
- Front
- Back
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Gross Domestic Product (GDP)
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The value of the output of all goods and services produced within a country
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GDP (Formula)
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Consumption (c) + Investment (I) + Government (G) + Trade Balance (Exports - Imports)
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Consumption (c)
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2/3 of GDP. Consumption also includes money passed directly to citizens. Consumption is payment for g&s
- does not count spending on new houses |
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investment (I)
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is total spending on goods that will be used in the future to produce more goods.
includes spending on capital equipment (e.g., machines, tools) structures (factories, office buildings, houses) inventories (goods produced but not yet sold) |
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Government (g)
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is all spending on the g&s purchased by govt at the federal, state, and local levels.
G excludes transfer payments, such as Social Security or unemployment insurance benefits. They are not purchases of g&s. |
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Trade Balance (X-M)
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NX = exports – imports
Exports represent foreign spending on the economy’s g&s. Imports are the portions of C, I, and G that are spent on g&s produced abroad. Adding up all the components of GDP gives: |
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Durable Goods
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Long-lasting goods like cars and refrigerators
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Nondurable goods
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Short-lived goods like clothing and food
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Inventories
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Goods that have been produced, but not yet been sold
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Double Counting
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A potential mistake to be avoided in measuring GDP, in which output is counted two or more times as it travels through the stages of production
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Final goods and services
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Output used directly for c, i, g, and trade purposes; contrast with intermediate goods
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Intermediate goods and services
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Output provided to other buisnesses at an intermediate stage of production; not for final users;
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Recession
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A significant decline in national output
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Depression
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An especially lengthy and deep decline in outpu
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Peak
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During the buisness cycle, the highest point of output before a recession begins
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Trough
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During the business cycle, the lower point of output in a recession, before a recover begins
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Business cycle
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The relatively short term movement of the economy in and out of recession
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