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31 Cards in this Set

  • Front
  • Back
expenditure approach
calculating GDP by adding up spending on all final goods and services produced in the nation during the year.
income approach
caluclating GDP by adding up all earnings from resources used to produce output in the nation.
final goods and services
goods and services sold to final, or end, users.
intermediate goods and services
purchased by firms for further reprocessing and resale excluded from GDP
components of aggregate expenditure
consumption, investment, government, purchases and net exports.
household purchases of final goods and services, except for new residences. Largest spending category 70%. Includes services, nondurable and durable goods.
purchase of new plants, new equipmrnt, new buildings and new residences, plus net additions to inventories. Spending on new capital goods. about 16% of US GDP. consists of spending on current production that isn't used for current consumption.
physical capital
under investment: manufactured items to produce goods and service.
residential construction
under investment: building new homes or dwelling places.
under investment: producers stocks of finished and in-process goods.
government purchases
spendings for goods and services by all levels of gov; gov outlays minus transfer payments. about 19% of US GDP.
transfer payments
social security, welfare and unemployment insurance
net exports
reflects international trade in goods and services. The value of a country's exports minus value of it's imports. about -5% of GDP.
Aggregate Expenditure
total spending on final goods and services in an economy during a given period.

C + I + G + ( X - M ) = AE = GDP
aggregate income
= sum of all income earned by resource suppliers in economy.
value added
@ each stage of production, the selling price of a product minus the cost of intermediate goods purchased from other firms.
disposable income
income households have available to spend or to save after paying taxes and receiving transfer payments.
net taxes
taxes minus transfer payments
financial markets
banks and other financial institutions that facilitate the flow of funds from savers to borrowers.
any spending other that by households or any income other than from resource earnings; includes investment, gov purches, exports and transfer payments.
any diversion of income from the domestic spending stream; includes savings, taxes, and imports.
underground economy
market transactions that go unreported either b/c the are illegal or b/c ppl involved want to evade taxes.
measures the value of the capital stock that is used up or becomes obcolete in the production process.
net domestic product
= GDP - Depreciation
nominal GDP
GDO based on prices prevailing at the time of production.
index number
compares value of some variable in a particular year to is value in a base year (100)
base year
yr where other years are compared when constructing an index.
price index
# tht shows avg. price of products; changes in a price index over time shows changes in economy's average price level.
consumer price index (CPI)
measure of inflation based on cost of a fixed market basket of goods and services.
GDP Price Index
(nominal GDP x 100) / (Real GDP)
comprehensive inflation measure of all goods and services included in GDP
Chain weighted system
inflation measure that adjusts the weights from yr to yr in calculating a preice index, thereby reducing the bias caused by a fixed-price weighing system.