Ch. 7 Flashcards
(22 cards)
Gross Domestic Product (GDP)
The total market value of all final goods and services produced annually within a country’s borders.
final good
A good in the hands of its final user.
intermediate good
A good that is an input to the production of a final good.
double counting
Counting a good more than once when computing GDP.
transfer payment
A payment to a person that is not made in return for goods and services currently supplied.
consumption
The sum of spending on durable goods, nondurable goods, and services.
investment
The sum of all purchases of newly produced capital goods, changes in business inventories, and purchases of new residential housing.
inventory investment
Changes in the stock of unsold goods.
fixed investment
Business purchases of capital goods, such as machinery and factories, and purchases of new residential housing.
government purchases
Federal, state, and local government purchases of goods and services and gross investment in highways, bridges, and so on.
government transfer payments
Payments to persons that are not made in return for currently supplied goods and services.
imports
Total domestic (U.S.) spending on foreign goods.
exports
Total foreign spending on domestic (U.S.) goods.
net exports
Exports minus imports.
national income
Total income earned by U.S. citizens and businesses, no matter where they reside or are located; the sum of the payments to resources (land, labor, capital, and entrepreneurship): National income = Compensation of employees + Proprietors’ income + Corporate profits + Rental income of persons + Net interest.
Capital Consumption Allowance (Depreciation)
The estimated amount of capital goods used up in production through natural wear, obsolescence, and accidental destruction.
Net Domestic Product (NDP)
GDP minus the capital consumption allowance.
personal income
The amount of income that individuals actually receive. It is equal to national income minus undistributed corporate profits, social insurance taxes, and corporate profits taxes, plus transfer payments.
disposable income
The portion of personal income that can be used for consumption or saving; equal to personal income minus personal taxes (especially income taxes).
real GDP
The value of the entire output produced annually within a country’s borders, adjusted for price changes.
economic growth
Increases in Real GDP.
business cycle
Recurrent swings (up and down) in Real GDP.
