Chapter 5 Flashcards
Define Gross Domestic Product (GDP)
market value of all final goods and services produced within a region in a given period of time
Define Final Good
good not used again in economy i.e food
What are the issues associated with calculating GDP?
differentiating between final vs intermediate goods, double counting items. As a result you should use value added method for most accuracy.
Define Value added
Value of output produced - value of purchased inputs
What is the Expenditure GDP formula
C + I + G + (X-M)
What are the components to the Expenditure GDP formula?
Consumption (C) - all goods and services produced and sold to household during a given period of time
categories include services, non-durables, semi durables and durables
Investment (I) - production of final goods not for present consumption
categories include business spending, changes in inventory and residential construction
Government Spending (G)
valued at cost
transfer payments are excluded
Net Exports (Nx) = Exports (x) - Imports (M)
What is the Income GDP formula
Factor Incomes ( w + uB + PR + N) + Adjustments (i.e IT and D)
What is Gross National Product (GNP)?
value of income earned by citizens of a country
GNP = GDP + Net Foreign Investment Income (NFII)
What is Personal Income (PY)?
Income received by households and unincorporated businesses. It is before taxes
What is the Disposable Income (DY) ?
Income after taxes
PY - Personal Taxes (PT) = Consumption (C) + Private Savings (PS)
What 2 transaction types are left out of national income?
The underground economy(illegal markets) and legitimate
What are the components of the Income GDP formula?
Wages and Salaries (w) Unincorporated Business (uB) Corporate Profits (PR) Interest and other Investment income (N) Indirect Taxes (IT) Depreciation (D)
