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22 Cards in this Set
- Front
- Back
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1.What is the purpose of “national income accounting”?
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P127
measures the economy's overall performance. it does it for the economy as a whole what private accounting does for the individual firm or for the individual household. |
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2.What is the BEA? Identify one of its functions.
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P127
Bureau of Economic Analysis (and is an agency of the Commerce Department) compiles the National Income and Product Accounts (NIPA) for the U.S. Economy. This accounting enable economists and policy makers to : Assess the health of the economy by comparing levels of production at regular intervals |
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3.What is GDP? How is it measured?
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P127
Total monetary value of good and services produced within the borders of a country. define aggregate output as the dollar value of all final goods and services produced within the borders of a given country during a given period of time, typically a year |
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4.What is the difference between an intermediate good and a final good?
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P127
intermediate goods- are goods and services that are purchased for resale or for further processing or manufacturing, Final goods are consumption goods, capital goods and services that are purchased by their final user. |
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5.What does the term “value added” mean?
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P128
is the market value of a firms output less the value of the inputs the firm has bought from others The difference between what the firm pays for inputs and what it recieves selling it. |
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6.What is not included in GDP? Why are these items omitted?
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P128
-Nonproduction transactions --Financial transactions ---Public transfer payments. These ar social security payments, welfare, and veterans payments. These are paid directly without them contributing to the GDP. ---Private transfers. such payments include money given to children by family, cash gifts at christmas, They produce nothing. ---Stock market transactions- the buying and selling of stocks and bonds is just a matter of swaping bits of paper --Secondhand sales ---products that were purchased and resold. The purchase after the initial purchase does not contribute to GDP. |
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7.How do the expenditures approach and the income approach for measuring GDP differ?
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P129+132
expenditures- view GDP as the sum of all the money spent in buying it.( who spend money) -The method that adds all expenditures made for final goods and services to measure the gross domestic product, GDP=(C+ I) + (G+X) c=consumption(private sector) I = invest(Private) G=government(public sector) X=exports net income-can view GDP in terms of income derived or created -the method that adds all the income generated by the production of final goods and services to measure the gross domestic product |
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8.Identify the major components of the expenditures approach
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P129 fig 7.1
GDP=(C+ I) + (G+X) c=consumption(private sector) I = invest(Private) G=government(public sector) X=exports net |
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9.What categories are included as Personal Consumption Expenditures?
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P129
durable consumer good(automobiles, refrigerators) nondurable consumer goods(bread, milk) consumer expenditures for services(lawyers, doctors) |
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10.What is the difference between durable and non-durable goods?
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P129
Durable is long term 3 or more non- are consumed, used in everyday life. |
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11.What categories are included in gross domestic investment?
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P129
-all final purchases of machinery, equipment and tools by businees enterprises -all construction -changes in inventory |
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12.What does the term “investment” include and exclude?
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P130
included- all residential construction because it has the potential to earn and income through rental. excluded- transfer of paper assets, resale of tangible assest(house, jewlry,etc) |
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13.What is the difference between gross investment and net investment?
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P130
Gross -means that we are refering to all investment goods Net-only investment in the form of added capital. The ammount of capital that is used up over the course of a year called depreciation.(gross investment minus the depreciation= net) |
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14.Identify the two components of government purchases.
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P130
-expenditures for goods and services that government consumes in providing public services. -expenditures for publicly owned capital such as schools and highways, which have long lifetimes. |
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15.How are net exports computed?
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P132
net exports to be equal to exports minus imports. Net Exports Xn= exports(X) - imports (M) |
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16.What is the formula for calculating GDP?
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p132
GDP=C+ Ig + G+Xn Consumption gross private domestic Investment Government purchase net eXports |
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17.What is included in Personal Income (PI)?
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P135
includes all income received, whether earned or unearned. |
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18.What does Disposable Income represent?
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P135
is personal income less personal taxes. is the amount of incomethat household have left over after paying taxes. |
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19.What is the difference between nominal GDP and real GDP?
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P137
nominal-GDP based on prices that prevail. -the GDP measured in terms of the price level at the time of measurement (unadjusted for inflation) real-a GDP that has been deflated or inflated to reflect changes in the price level. -GDP adjusted for inflation; GDP in a year divided by the GDP price index for that year, the index expressed as a decimal. |
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20.What is a price index? How is it computed?
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P137
is a measure of the price of a specified collection of goods and services called a "market basket" in a given year as compared to the price of an identical collections of good and services in a refernence year. (now verus then) index=now/then X100 -an index number that shows how the weighted-average price of a "market basket" of goods change over time. |
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21.Identify some of the shortcomings of GDP.
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P140
Non market activities- homemakers, carpenters that fix their own homes Leisure- improved product quality-improvement to products ove the years the underground economy-- the crime factor |
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22.Read the Last Word article on Magical Mystery Tour. What sources are listed and what type of data does each provide?
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P
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