Quiz 2

Front 1

National Income Accounting

Back 1

measures the economy's overall performance

Front 2

What does National Income Accounting enable economists & policymakers to do?

Back 2

1. Assess the health of the economy by comparing levels of production at regular intervals
2. Track the long-run course of the economy to see whether it has grown, been constant, or declined.
3. Formulate policies that will safeguard and improve the economy's health.

Front 3

Gross Domestic Product (GDP)

Back 3

primary measure of the economy's performance; annual total output of goods and services

Front 4

What does GDP include?

Back 4

only the market value of final goods (ignores intermediate goods altogether)

Front 5

Intermediate Goods

Back 5

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

Front 6

Final Goods

Back 6

goods and services that are purchased for final use by the consumer

Front 7

Multiple Counting

Back 7

including the value of intermediate goods in the GDP

Front 8

value added

Back 8

market value of a firm's out put less the value of the inputs the firm has bought from others

Front 9

nonproduction transactions

Back 9

purely financial transactions & second-hand sales

Front 10

Types of purely financial transactions

Back 10

* Public Transfer Payments - social security payments, welfare payments, veterans' payments
* Private Transfer Payments - money parents give children or cash gifts at Christmas
* Stock Market Transactions - buying and selling of stocks & bonds

Front 11

expenditures approach

Back 11

the sum of all the money spent buying the GDP - output approach

Front 12

income approach

Back 12

income derived or created from producing the GDP (earnings or allocations approach)

Front 13

Personal Consumption Expenditures (C)

Back 13

all expenditures by household (durable consumer goods, nondurable consumer goods, consumer expenditures for service)

Front 14

Gross Private Domestic Investment (Ig)

Back 14

* all final purchases of machinery, equipment, and tools by business enterprises
* all construction
* changes in inventories

Front 15

net private domestic investment

Back 15

investment in the form of added capital

net investment = gross investment - depreciation

Front 16

Government Purchases (G)

Back 16

1. expenditures for goods and services that government consumes in providing public services
2. expenditures for social capital such as schools and highways

Front 17

Net Exports (Xn)

Back 17

Net exports (Xn) = exports (X) - imports (M)

Front 18

GDP (formula)

Back 18

GDP = C + Ig + G + Xn

Front 19

What makes up the national income?

Back 19

1. Compensation of Employees
2. Rents
3. Interest
4. Proprietors' Income
5. Corporate Profits
6. Taxes on Production & Imports

Front 20

Net Domestic Product

Back 20

NDP = GDP - consumption of fixed capital

Front 21

National Income

Back 21

NI = NDP - Statistical Discrepancy - Net Foreign Factor Income

Front 22

Personal Income

Back 22

all income received whether earned or unearned

Front 23

Disposable Income

Back 23

personal income less personal taxes

Front 24

Nominal GDP

Back 24

unadjusted GDP

Front 25

Real GDP

Back 25

GDP that has been inflated or deflated to reflect changes in the price level

Front 26

Price Index

Back 26

a measure of the price of a specified collection of goods and services

Front 27

PI (formula)

Back 27

PIy = price of market basket in year y / price of same basket in base year X 100

Front 28

Real GDP (formula)

Back 28

nominal GDP / price index (in hundredths)

Front 29

What does GDP leave out?

Back 29

1. Nonmarket Activities
2. Leisure
3. Improved Product Quality
4. Underground Economy
5. Environment

Front 30

Real GDP per capita

Back 30

GDP / population size

Front 31

rule of 70

Back 31

states that we can find the number of years it will take for some measure to double

Front 32

# years to double GDP

Back 32

Approximate # of years required to double real GDP = 70 / annual percentage rate of growth

Front 33

Main sources of GDP growth

Back 33

1. increasing inputs of resources
2. increasing the productivity of the inputs

Front 34

labor force

Back 34

people who are willing and able to work

Front 35

Unemployment Rate

Back 35

Unemployment Rate = unemployed / labor force X 100

Front 36

Types of Unemployment

Back 36

1. frictional unemployment
2. structural unemployment
3. cyclical unemployment

Front 37

frictional unemployment

Back 37

workers who are either searching for jobs or waiting to take jobs in the near future

Front 38

structural unemployment

Back 38

changes in consumer demand and technology alter the structure of the demand for labor

Front 39

cyclical unemployement

Back 39

unemployment caused by a decline in total spending

Front 40

full-employment rate of employment

Back 40

the rate at which the economy is said to be producing at its potential output

Front 41

GDP gap

Back 41

the difference between actual GDP and potential GDP

Front 42

Okun's law

Back 42

for every 1% by which the actual unemployment rate exceeds the natural rate, a negative GDP gap of about 2% occurs

Front 43

What causes unequal burdens of unemployment?

Back 43

1. occupation
2. age
3. race & ethnicity
4. education
5. duration