Econ Chapter 6

Front 1

national income and product accounts

Back 1

Data collected and published by the government describing the various components of national income and output in the economy.

Front 2

gross domestic product (GDP)

Back 2

The total market value of all final goods and services produced within a given period by factors of production located within a
country.

Front 3

final goods and services

Back 3

Goods and services produced for final use.

Front 4

intermediate goods

Back 4

Goods that are produced by one firm for use in further processing by another firm.

Front 5

value added

Back 5

The difference between the value of goods as they leave a stage of production and the cost of the goods as they entered that stage

Front 6

gross national product (GNP)

Back 6

The total market value of all final goods and services produced within a given period by factors of production owned by a country’s citizens, regardless of where the output is produced.

Front 7

expenditure approach

Back 7

A method of computing GDP that measures the amount spent on all final goods during a given period.

Front 8

income approach

Back 8

A method of computing GDP that measures the income—wages, rents, interest, and profits—received by all factors of production in producing final goods.

Front 9

GDP =

Back 9

C + I + G + (EX - IM)

Front 10

personal consumption expenditures (C)

Back 10

A major component of GDP: expenditures by consumers on goods and services.

Front 11

durable goods

Back 11

Goods that last a relatively long time, such as cars and household appliances.

Front 12

nondurable goods

Back 12

Goods that are used up fairly quickly, such as food and clothing.

Front 13

services

Back 13

The things we buy that do not involve the production of physical things,
such as legal and medical services and education.

Front 14

gross private domestic investment (I)

Back 14

Total investment in capital—that is,
the purchase of new housing, plants, equipment, and inventory by the private (or nongovernment) sector.

Front 15

nonresidential investment

Back 15

Expenditures by firms for machines, tools, plants, and so on.

Front 16

residential investment

Back 16

Expenditures by households and firms on new houses and apartment buildings.

Front 17

change in business inventories

Back 17

The amount by which firms’ inventories change during a period. Inventories are
the goods that firms produce now but intend to sell later.

Front 18

depreciation

Back 18

The amount by which an asset’s value falls in a given period.

Front 19

gross investment

Back 19

The total value of all newly produced capital goods (plant, equipment, housing, and inventory) produced in a given period.

Front 20

net investment

Back 20

Gross investment minus depreciation.

Front 21

government consumption and gross
investment (G)

Back 21

Expenditures by federal, state, and local governments for final goods and services.

Front 22

net exports (EX - IM)

Back 22

The difference between exports (sales to foreigners of U.S.- produced goods and services) and imports (U.S. purchases of goods and services from abroad). The figure can be positive or negative.

Front 23

national income

Back 23

The total income earned by the factors of production owned by a country’s citizens.

Front 24

compensation of employees

Back 24

Includes wages, salaries, and various supplements—employer contributions to social insurance and pension funds, for example—paid to households by firms and by the government.

Front 25

proprietors’ income

Back 25

The income of unincorporated businesses.

Front 26

rental income

Back 26

The income received by property owners in the form of rent.

Front 27

corporate profits

Back 27

The income of corporate businesses.

Front 28

net interest

Back 28

The interest paid by business.

Front 29

indirect taxes minus subsidies

Back 29

Taxes such as sales taxes, customs duties, and license fees, less subsidies that the government pays for which it receives no goods or services in return.

Front 30

net business transfer payments

Back 30

Net transfer payments by businesses to
others.

Front 31

surplus of government enterprises

Back 31

Income of government enterprises.

Front 32

net national product (NNP)

Back 32

Gross national product minus depreciation; a nation’s total product minus what is
required to maintain the value of its capital stock.

Front 33

statistical discrepancy

Back 33

Data measurement error.

Front 34

personal income

Back 34

The total income of households before paying personal income taxes.

Front 35

disposable personal income or after-tax income

Back 35

Personal income minus personal income taxes. The amount that households have to spend or save.

Front 36

personal saving

Back 36

The amount of disposable income that is left after total personal spending in a given period.

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personal saving rate

Back 37

The percentage of disposable personal income that is saved. If the personal saving rate is low,
households are spending a large amount relative to their incomes; if it is high, households are spending cautiously.

Front 38

current dollars

Back 38

The current prices that one pays for goods and services.

Front 39

nominal GDP

Back 39

Gross domestic product measured in current dollars.

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weight

Back 40

The importance attached to an item within a group of items.

Front 41

base year

Back 41

The year chosen for the weights in a fixed-weight procedure.

Front 42

fixed-weight procedure

Back 42

A procedure that uses weights from a given base year.

Front 43

The use of fixed-price weights to estimate real GDP leads to problems because it ignores:

Back 43

Structural changes in the economy.

Supply shifts, which cause large decreases in price and large increases in quantity supplied.

The substitution effect of price increases.

Front 44

underground economy

Back 44

The part of the economy in which transactions take place and in which income is generated that is unreported and therefore not
counted in GDP.

Front 45

gross national income (GNI)

Back 45

GNP converted into dollars using an average of currency exchange rates over several years adjusted for rates of inflation.