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22 Cards in this Set
- Front
- Back
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How do you compare the sizes of two economies?
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By the value of their production (GDP)
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A measure of the overall value of goods and services produced is called ____
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GDP
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What does the "National Accounts" (national income and product accounts) do?
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Keeps track of the flows of money between different sectors of the economy
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If a countries accounts are reliable what does this mean?
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Their more economically advanced
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Who in the U.S. Calculates the number of national accounts
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Bureau of Economic Analysis
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What are final goods and services
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Goods sold to the end user (buyer buys a car)
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What are intermediate goods and services
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Goods/services that are bough from one firm by another. Inputs for the production of final goods (steel, glass)
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What is GDP defined ad
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The total value of all final goods/services produced in the economy in a given year
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What are the 3 ways of calculating GDP
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1. Add up total value of all Final goods/services produced
2. Adding up spending on all domestically produced goods/services 3. Adding to total factor income earned by households from firms in the economy |
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Why aren't intermediate goods counted when calculating GDP?
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It would cause us to count the same item several times and artificially inflate GDP
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What is value added
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The value of its sales - the value of its purchases of intermediate goods
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What is aggregate output
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The economy's total quantity of output of final goods and services. Used to calculate real GDP
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What is real GDP
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Total value of all final goods and services produced in the economy in a given year. Using base year
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What is nominal gdp
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Value of all final goods produced in an economy in a given year using prices current in the year in which output is produced
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CPI in base period is always what number
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100
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What is aggregate price level
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Measure of overall level of prices in the economy
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What is a market basket
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Hypothetical set of consumer purchases of goods/services
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What does a price index measure
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The prices of goods in a market basket
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What is inflation rate
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Percent change per year in a price index (consumer price index)
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What is consumer price index (CPI)
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Measures typical cost of the market basket of a typical urban american family
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What are 4 problems with CPI
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1.) improved produced quality isn't accounted for
2.) slow to incorporate new goods into the basket 3.) doesn't capture people's willingness to substitute 4.) doesn't capture prices at outlet malls |
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the problems with CPI cause the government to overestimate inflation at what percent?
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1.1%
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