Economics for Managers Chapter 11 Flashcards
Gross Domestic Product
The comprehensive measure of the market value of all currently produced final goods and services within a country in a given period of time by domestic and foreign-supplied resources.
Circular Flow
The framework for the aggregate macroeconomic model, which portrays the level of economic activity as a flow of expenditure form consumers to firms or producers as consumers purchase goods and services produced by these firms. This flow then returns to consumers as income received from the production process.
Mixed Economy
An economy that has both a private (household and firm) sector and a public (government) sector.
Open Economy
An economy that has both domestic and foreign sectors.
Expenditure or Output Approach
Measuring overall economic activity by adding the expenditure on the output produced in the economy.
Aggregate Expenditure
The sum of consumption, investment, government, and net export spending on the total amount of real output produced in an economy in a given period of time, which equals the income generated from producing and selling that output.
Earning or Income Approach
Measuring overall economic activity by adding the earnings or income generated by selling the output produced in the economy.
National Income Accounting System
A system of accounts developed for each country, based on the circular flow,, whose purpose is to measure the level of economic activity in that country.
National Income and Product Accounts
The US national income accounting system, operated by the Bureau of Economic Analysis (BEA) in the US Department of Commerce.
Final Goods and Services
Goods and services that are sold to their end-users.
Intermediate Goods and Services
Goods and services that are used in the production of other goods and services.
Value-added Approach
A process of calculating the value of the final output in an economy by summing the value added in each stage of production (i.e., raw materials to semifinished goods to final products).
Underground Economy
Economic transactions that cannot be easily measured because they are not reported on income tax returns or other government economic analysis.
Imputed Value
An estimated value for nonmarket transactions, such as the rental value of owner-occupied housing, included in GDP.
Transfer Payments
Payments that represent the transfer of income among individuals in the economy, but do not reflect the production of new goods and services.
Nominal GDP
The value of currently produced final goods and services measured in current year prices.
Real GDP
The value of currently produced final goods and services measured in constant prices, or nominal GDP adjusted for price level changes.
GDP Deflator
A measure of price changes in the economy that compare the price of each year’s output of goods and services to the price of that same output in a base year.
Business Cycles
The periodic increases and decreases in overall economic activity reflected in production, employment, profits, and prices.
Expansion
The rising phase of a business cycle, in which the direction of a series of economic indicators turns upward.
Recession
The falling phase of a business cycle, in which the direction of a series of economic indicators turns downward.
Personal Consumption Expenditures
The total amount of spending by consumers on durable goods, nondurable goods, and services in a given period of time.
Durable Goods
Commodities that typically last three or more years, such as automobiles, furniture, and household appliances.
Nondurable Goods
Commodities that last less than three years and may be consumed very quickly, such as food, clothing, and gasoline.
