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13 Cards in this Set
- Front
- Back
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What is GDP?
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Monetary measure of the total market value of final goods and services produced within a country in one year.
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What does GDP count?
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1. New domestic production
2. Final goods |
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What is excluded from new domestic production?
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1. Exchanges of previously produced goods
2. Public transfer payments 3. Private transfer payments 4. The sale of stocks and bonds |
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What is excluded from final goods?
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Intermediate goods - goods and services used as inputs for the production of final goods
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What is the expenditures or output approach to GDP?
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Consumption + Investment + Government Purchases + Net Exports
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What is the income or allocations approach to GDP?
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Wages + Rents + Profits + Statistical Adjustments
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What are the shortcomings of GDP (what does GDP not measure)?
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Useful output (homemakers' services, parental child care, volunteer efforts)
Improvements in product quality Improved living conditions Changes in distribution of income. Underground economy Environment Non-economic sources of well-being |
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MPC
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change in consumption/change in income
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MPS
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change in savings/change in income
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What is the multiplier effect?
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Changes in spending ripple through the economy to generate larger changes in real GDP
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What is the formula for the multiplier?
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Change in real GDP / Initial change in spending
OR 1/(1-MPC) |
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What is the formula for change in GDP?
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Multiplier * Initial change in spending
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What is aggregate demand?
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shows the various amounts of real domestic output that domestic and foreign buyers will desire to purchase at each possible price level
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