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Flashcards in Chapter 17 Deck (16):
1

Gross domestic product

The market value of all final goods and services produced in the economy during a defined period of time.

2

double counting

Problem that can arise when calculating gross domestic product (GDP). Occurs when the price of both final and intermediate goods is included when
calculating GDP. This occurs because most products we buy are manufactured in stages by many different companies.

3

intermediate goods and services

Goods and services used as components to produce final goods and services. When calculating gross domestic product (GDP), their value is
captured in the final product’s price.

4

final goods and services

Intermediate goods and services are used as components to produce final goods and services. The value of gross domestic product (GDP) is calculated
by counting only final goods and services produced.

5

Consumption

Spending by households on goods and services. Note that this does not include new housing, which instead falls under the investment category.

6

Investment

Spending on capital, equipment, inventories, and structures.

7

Government spending

Spending on goods and services by local, state, and federal governments. Note that this is different from transfer payments such as Social
Security, which do not affect total production in an economy.

8

Exports

Goods and services that are produced domestically and sold in other countries. An increase in exports adds to gross domestic product (GDP) since the good was produced locally.

9

Imports

Goods and services that are produced abroad and then purchased domestically. An increase in imports lowers gross domestic product (GDP) since domestic dollars are spent on foreign goods. Net exports, or the trade balance, provide a measure of the gap between exports and imports.

10

Net exports

A measure of the gap between exports and imports. Also referred to as the trade balance.

11

trade balance

Measures the gap between exports and imports. Also referred to as net exports.

12

inflation

A general and ongoing rise in prices in an economy.

13

nominal GDP

Method in which GDP is stated in nominal values.

14

real GDP

Method in which GDP is stated as nominal GDP minus the effect of inflation.

15

nominal values

Refers to the number that is actually announced at a particular time for any economic statistic.

16

GDP deflator

Price index the Bureau of Labor Statistics (BLS) calculates. It includes all the components of GDP (that is, consumption plus investment plus government plus net exports). Can be calculated as: Nominal GDP/Real GDP*100=GDP deflator.