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Flashcards in chapter 9 Deck (30):
1

how much value is created in a year=

how much income is earned in a year

2

True False: wealth and income are the same thing

F income reflects value creation, wealth is a stock of what you own

3

True False: we measure income as the social gain from production

F we measure how much is paid for output that is produced

4

GDP is

market value of all goods and services produced within country's borders in one year

5

what is a final good

one that is sold to a final consumer

6

True False: sales of used goods are not counted in GDP

T since they have already been counted once this would cause double counting

7

True False: value of a newly issued share of stock is counted in GDP

F the money that comes from the stock sale will purchase capital and to count both transactions would be double counting

8

2 approaches to calculating GDP

income approach, expenditure approach

9

government uses _ to calculate GDP

income approach, because tax records give information about income and because they gather this data as people pay taxes

10

four components of the expenditure approach

consumption, government purchases, investment, net exports

11

what is the definition of investment with regards to the expenditure approach to GDP?

spending by businesses on capital, changes in business inventories, and spending on new residential housing

12

real GDP is

it is what GDP would be if prices were the same as they had been in the base year

13

economic growth is

the percentage change in real GDP over a years time

14

strong growth rate is

3.5%

15

if we are at the peak of economic activity _ is coming in the future

contracting

16

1982 recession compared to recent recession

both just as bad but 1982 recovery was much stronger

17

per capita GDP is

GDP/population= how well off people in the economy are

18

US GDP compared to canada GDP

US is 20% bigger

19

US in terms of economic freedom

not highest ranking and continues to fall

20

most recent quarterly US economic growth

1/10 of 1%

21

US GDP in the most recent quarter

15.9 trillion

22

intermediate goods—

those
not sold to a final user.

23

transfer payments—

taking from one person and giving to another,but not in return for any good or service

24

bads—

unwanted phenomena such as disease, crime, and garbage.

25

Consumption—

spending by consumers on nondurable goods, durable goods, and services. Durable
goods are those which last for at least a year

26

Investment—

spending by business on capital (plant, equipment, tools, etc.), changes in business
inventories, and spending on new residential housing. Note, this does not mention stocks or bonds.

27

Government Purchases—

spending by all levels of government on goods and services. Note that
transfer payments do not fit this definition

28

Net Exports =

Net Exports = Exports - Imports. Note that this makes it seem as if “Exports, good. Imports bad,”
which is contrary to what we learned in the trade chapter. However, both imports and exports are
done by those who are making the economy better off

29

recession

Two successive quarters (three month periods) of negative economic growth

30

The business cycle

describes the ups and downs of the economy.