Chapter 4 Measuring Total Production and Income Flashcards
Study (33 cards)
Macroeconomics
The study of the economy as a whole… topics such as inflation, unemployment, and economic growth.
Business Cycle
Altering periods of economic expansion and economic recession.
Recession
The period of a business cycle where total production and employment are decreasing.
Expansion
The period of a business cycle where total production and employment are increasing
Economic Growth
The ability of an economy to produce increasing quantities of goods and services.
Inflation Rate
The % increase in the price level from one year to the next
Gross Domestic Product (GDP)
The market value of all final goods and services, produced domestically.
How To Calculate GDP For A Year?
PxQ
GDP’s For 2 Products In A Year?
PriceA x QuantityA + PriceB x QuantityB
Final Good (Add Example)
Something that is purchased by the end user. Ex: The Sandwich sold to a customer, not the price of the ingredients.
Intermediate Good (Add Example)
Goods that are used to complete a final good.–> In GDP it is only an intermediate good if someone is buying the product. Ex: Ingredients used to make a sandwich.
Is GDP Counted In Canada If A Canadian Firm Produces The Product Overseas?
No, GDP is only counted if the product is produced domestically. Even if it is produced by a Canadian firm.
Compensation
Covers all the employees benefits workers receive from providing labor to firms.
Gross Operating Surplus
Covers payments to owners of the capital used by firms and governments.
Net Operating Surplus
Payments to owners of capital over and above compensation for capital that wore out.
Capital Consumption
Payment to the owners for capital that wore out.
Suppose, You lease a truck to someone and receive $5,000 a year. There is a $1,000 depreciation per year. Gross operating surplus? Net operating surplus?
Gross = $5,000
Net = $4,000
Gross Mixed Income
Covers income generated by small businesses for their owners.
Consumption of Fixed Capital
The depreciation of the capital used by small businesses.
Net Mixed Income
The payment to owners of small businesses over and above the compensation for dep. of capital owned by businesses.
Taxes Less Subsidies
Payment to Gov. that mimics income received by the owners of other inputs.
Final Consumption
All the domestic purchases of goods/services by their users.
Gross Fixed Capital Formation
The purchase of fixed assets by firms, Gov., and households. –> Benefits over long period of time that is converted into cash.
Investment in Inventories
Spending on finished products kept on hand to sell.
