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Flashcards in Chapter 7 Deck (23):
1

what is the expenditure approach of measuring the sum GDP?

consumption + Investment + Government purchases + net exports

2

GDP is computed by using ______ prices

current year

3

Real GDP is computed by using ______ prices

base year

4

what are the three approaches for calculating GDP?

Expenditure, Income, and added value

5

investment is the sum of

= purchases of newly produced capital goods + changes in business inventories + purchases of new residential housing

6

GDP is _____ products produced. (sold and held in inventory)

ALL

7

Real GDP is GPD in ______ year prices

base year

8

what is economic growth?

Real GDP this year exceeds the REAL GDP last year

9

equation for real GDP =

(current year quantities)x(base year prices)

10

government purchases consists of dollars spent by

federal, state and local governments

11

consumption is the sum of

durable goods + nondurable goods + services

12

net exports is equal to

exports - imports

13

fixed investment =

business purchasing capital goods (machinery, facroties) + new residential housing

14

Rule of 72 equation

years to double = 72/growth rate per year

14

Gross domestic product = total market value of all final ____________ and ______________ produced ANNUALLY with the country's borders

Goods; services

15

Expenditure approach
GDP = __________ + __________ + ___________ + (___________-___________)

Consumption + investment + government purchases + (exports - imports)

16

Investment consists of

New capital, residential housing, inventories

17

Social Security Payments are

Government transfer payments and are not included in the GDP

18

Why do economists take final foods and services into account when calculating GDP?

To avoid double-counting

19

What are the two approaches to measuring GDP

1. Expenditure approach
2. Income approach
3. Added value approach

21

Investment is equal to all purchases of newly produced capital goods +

Changes in business inventories+ purchases of new residential housing

22

Depreciation refers to a decrease in the value of a good caused by

"wear and tear" of capital goods over time.

23

net domestic product =

GDP - capital consumption allowance (depreciation)