Gdp, Growth, And Instability

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National income accounting

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measures the economy's overall performance. It does for the economy as a whole what private accounting does for the individual firm or for the individual household.

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Bureau of Economic Analysis(BEA)

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an agency of the Commerce Department which compiles the National Income a Product Accounts (NIPA) for the U.S. economy.

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Gross Domestic Product (GDP)

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primary measurement of the economy's health by its annual total output of goods and services, or as it is called, Aggregate Output.

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GDP

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defines aggregate output as the dollar value of all final goods and services produced within the borders of a give country during a given period of time, typically a year.

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Monetary Measure

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compares the relative values of the vast number of goods and services produced in different years.

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Final goods

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consumption goods, capital goods, and services that are purchased by their final users, rather than for resale or for further processing or manufacturing

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Intermediate goods

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goods and services that are purchased for resale or for further processign or manufacturing

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multiple counting

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including the value of intermediate goods in the measuremet of aggregate output, distorting the value of GDP

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value added

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the market value of a firms output LESS the value of the inputs the firm has bought from others.
At each stage, difference between what a firm pays for inputs and what irreceives from selling the product made form those inputs is paid out as wages, rent, interest, and profit.

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Nonproduction transactions

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do not involve generation of final goods. Two types: purely financial transactions and secondhand transactions.

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Public transfer payments

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Pure financial transaction; These are the social security payments, welfare payments, and veterans' patments that the government makes directly to households. Since recipients contribute nothing to CURRENT PRODUCTION in return, to include such payments in GDP would be to overstate the year's output.

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Private transfer payments

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pure financial transaction; payments include the money that parents give children, which produce no output. Transfer of funds from one private individual to another.

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Stock market transactions

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pure financial transaction; buying of selling of stocks(bonds) create nothig in the way of current production and are ot included in GDP. However, payments for the services provided by a stockbrocker are because their services are currently provided.

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Expenditures approach

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view of the GDP as the sum of all money spent in buying it

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Income approach

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view of the GDP as in terms of the income derived or created from producing it. (earnings or allocations)

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Personal Consumption Expenditures

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consumption expenditures by households, which covers durable consumer goods, nondurable consumer goods amd consumer expenditures for service.

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Gross private domestic investment

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all final purchases of machinery, equiptment, and tool by business enterprises. All construction. All changes in inventories.

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Net private domestic investment

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includes only investment in the form of added capital. The amount of capital that is used up over the course of a year is called depreciation.
Net investment = gross investment - depreciation

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disinvesting

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using up more captial than it is producing(nation's capital shrinks)

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government purchases

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or government consumption expnditures and gross investment have two components:
1) expenditures for goods and public services that government consumes in providing public services
2) expending for Publicly Owned Capital such as schools and highways, which have long lifetimes.
(federal, state, local) purchases include all government expenditures on final goods and direct purchases of resources, including labor.

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Net Exports (Xn)

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to be equal to exports minus imports:
Net Exports(Xn)=exports(X) - imports(M)

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GDP

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equation:
GDP= C+Ig+G+Xn

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consumption of fixed capital

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huge depreciation charge made against private and publicly owned capital each year

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Net Domestic Product (NDP)

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subractiion of cosumption of fixed capital(depreciation)from GDP.
NDP=GDP - depreciation

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Disposable Income(DI)

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personal income less personal taxes.

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Nominal GDP

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based on prices that prevailed when the output was produced is called unadjusted GDP

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Real GDP

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a GDP that has beed deflated or inflated to reflect changes in the price level, called adjusted GDP.
real GDP= nominal GDP/ price index(in hundreths)

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price index

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measure of the price of a specified colection of goods and services called a Market Basket