4: Measure a Nation's Income Flashcards
define microeconomics
the study of how individual households and firms make decisions and how they interact with one another in markets
define GDP
Gross domestic product: the total market value of all final goods and services produced within a country in a given period of time (usually 1 calendar year)
example of a leakage
private savings, taxes, GST
example of an injection
investments by investors, transfers ie welfare
indirect tax
GST
GDP equation
GDP = consumption + investment + government purchases + net exports
GDP(Y) = C I G NX
net exports
exports minus imports
define macroeconomics
the study of economy as a whole, to explain economic chances that affect many households, firms and markets.
Difference between nominal GDP and real GDP
nominal: value of goods and services at CURRENT PRICES; real: value at constant prices
What is the GDP deflator?
it is the ratio of nominal GDP to real GDP times 1000, giving us the nominal GDP that is attributable to a rise in prices rather than quantity rise.
formula for GDP deflator:
nominal/real GDP x 1000
three main indicators of quality of life
level of crime level of pollution leisure
list 3 problems of comparing GDP between countries
- difficult as black economy tends to be large in LDC (least developed countries) 2. GDP does not distinguish between constructive and destructive activities (ie manufacturing guns etc) 3. GDP counts restorative activities (rebuilding after earthquake)
the purchasing of new housing falls under which component of GDP?
investment
equation for gross national disposible income (YD)
Y + NFI
GDP + Net Foreign Income
