Test 2 Prep Flashcards
(48 cards)
What is a summary measure of a country’s aggregate economic activity (total output of goods and services)?
GDP
The definition “total value of all final goods and services produced within a country during a particular year” defines:
GDP
What are the 5 limitations of GDP?
1 - exclusion of non-market transactions from the GDP
2 - does not account for inequality of income and wealth
3 - GDP rises with each environmental disaster, pollution, repair expenditure
4 - does not account for the depletion of natural resources
5 - GDP increases with war expenditures and postwar rebuilding activities
The Human Development Index ranks countries on a scale of _ to _
0 to 1
The low scale of HDI is from _ to _
0 - 0.499
The medium scale of HDI is from _ to _
0.5 - 0.699
The high scale of HDI is from _ to _
0.7 - 0.799
The very high scale of HDI is from _ to _
0.8 - 1
How are countries ranked in the HDI (3 developmental goals)?
1 - Standard of living (measured by real per capita income)
2 - longevity (measured by life expectancy at birth)
3 - knowledge or education (measured by the weighted average of adult literacy and mean years of schooling)
What is defined by the equal-weighted average of the 3 developmental goals?
HDI
How is HDI calculated?
1/3 (income index) + 1/3 (expectancy index) + 1/3 (education index)
______ is included in the GDP, whereas ______ and ______ is not included in the GDP
- Financial transactions
- Transfer of secondhand goods
- Other excluded transactions
What are the three types of transactions included in financial transactions?
1 - securities
2 - government transfer payments
3 - private transfer payments
What is the formula that measures the GDP in the expenditure approach?
GDP = C + I + G + NX
What defines spending on goods and services but my household for immediate use?
Personal consumption
3 types of C:
1 - durable or hard goods
2 - nondurable or soft goods
3 - services
What defines spending on goods but for future use?
Gross domestic private investment
3 types of I:
1 - Business fixed investment (investment by firms in physical assets)
2 - new residential construction by households and landlords (privately owned)
3 - inventory investment by firms (unsold goods)
What defines spending on goods and services by the government?
Government purchases (military, equipment, public roads, civil services)
What is the formula for net exports?
Exports – imports
When the net export is bigger than zero, there is a ______
Trade surplus
When the net export is smaller than zero, there is a ______
Trade deficit
When the net export = zero, there is a ______
Balanced trade
What is the formula that measures the GDP from an income approach?
GDP = NDI + Indirect taxes – Subsidies + Depreciation
