Flashcards in Ch. 5 - Measuring Nation's Income Deck (30):
study of economy as a whole; economy wide phenomena; income vs. expenditure
Gross Domestic Product; total income of everyone in the economy; income = expenditure b/c for every dollar spent is a dollar of income for the seller
-market value of all final goods and services produced w/i a country in a given period of time.
Circular Flow Diagram shows the GDP as
spending, revenue, factor payments, and income
Factor Payments are...
to the Factors of Production (labour land capital)
Factors of Production are... (3)
labour, land, capital
final goods are.... are not....
intended for the end user ... not components in the production of other goods.
GDP includes tangible goods (eg?) and intangible services (eg?)
1. DVDs, beer, etc
2. cell service, concerts, cleaning, etc
T/F. Goods produced in the past are included in the current GDP.
How often is GDP calculated? (usually 2 times)
Per year or per quarter (3 months)
4 components of GDP are...
Consumption (c); investment (I); gov't purchases (G); net exports (nx)
GDP formula is...
y = c + i + g + nx
total spending by households on G+S
(renters = rent; homeowners = input (rental value))
total spending on goods to prod more goods in the future
-eg. equipment (tools), structures (factories), inventories (prod. but not sold)
T/F investment includes purchase of stocks or bonds
Gov't Purchases is...
spending by all levels of gov't (salaries, public works, etc)
T/F. Gov't purchases excludes CPP and elderly/employment/insurance benefits.
Net Exports is.... (formula)
exports - imports
foreign spending on G+S here
portions of G, C, I spent on G+S abroad
Which is corrected for inflation? Real or Nominal GDP?
Nominal GDP is...
values output using current Price
-change reflects both P + Q
Real GDP is...
output using P of a base year
-change only reflects Q (b/c essentially P is constant)
GDP Deflator is...
measure of the overall level of Prices
GDP Deflator formula is...
= 100 x (nominal GDP/real GDP)
How do you measure an economy's inflation rate?
compute the % increase in GDP from year to year
GDP + the economic well being is a perfect measure?
GDP is the main indicator of
average person's standard of living
What doesn't GDP measure that affects ppl's well-being? (4)
1. environment quality
2. leisure time
3. parental care (non market activity)
4. equitable income distribution
How does a high GDP help w/ living standards?
Brings in more money for gov't to spend on schools, environment etc.