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31 Cards in this Set
- Front
- Back
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expenditure approach
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calculating GDP by adding up spending on all final goods and services produced in the nation during the year.
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income approach
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caluclating GDP by adding up all earnings from resources used to produce output in the nation.
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final goods and services
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goods and services sold to final, or end, users.
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intermediate goods and services
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purchased by firms for further reprocessing and resale excluded from GDP
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components of aggregate expenditure
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consumption, investment, government, purchases and net exports.
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consumption
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household purchases of final goods and services, except for new residences. Largest spending category 70%. Includes services, nondurable and durable goods.
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investment
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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.
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physical capital
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under investment: manufactured items to produce goods and service.
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residential construction
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under investment: building new homes or dwelling places.
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inventories
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under investment: producers stocks of finished and in-process goods.
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government purchases
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spendings for goods and services by all levels of gov; gov outlays minus transfer payments. about 19% of US GDP.
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transfer payments
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social security, welfare and unemployment insurance
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net exports
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reflects international trade in goods and services. The value of a country's exports minus value of it's imports. about -5% of GDP.
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Aggregate Expenditure
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total spending on final goods and services in an economy during a given period.
C + I + G + ( X - M ) = AE = GDP |
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aggregate income
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= sum of all income earned by resource suppliers in economy.
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value added
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@ each stage of production, the selling price of a product minus the cost of intermediate goods purchased from other firms.
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disposable income
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income households have available to spend or to save after paying taxes and receiving transfer payments.
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net taxes
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taxes minus transfer payments
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financial markets
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banks and other financial institutions that facilitate the flow of funds from savers to borrowers.
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injections
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any spending other that by households or any income other than from resource earnings; includes investment, gov purches, exports and transfer payments.
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leakages
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any diversion of income from the domestic spending stream; includes savings, taxes, and imports.
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underground economy
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market transactions that go unreported either b/c the are illegal or b/c ppl involved want to evade taxes.
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depreciation
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measures the value of the capital stock that is used up or becomes obcolete in the production process.
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net domestic product
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= GDP - Depreciation
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nominal GDP
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GDO based on prices prevailing at the time of production.
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index number
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compares value of some variable in a particular year to is value in a base year (100)
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base year
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yr where other years are compared when constructing an index.
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price index
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# tht shows avg. price of products; changes in a price index over time shows changes in economy's average price level.
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consumer price index (CPI)
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measure of inflation based on cost of a fixed market basket of goods and services.
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GDP Price Index
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(nominal GDP x 100) / (Real GDP)
comprehensive inflation measure of all goods and services included in GDP |
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Chain weighted system
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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.
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