unit 2 measuring economic activity Flashcards
Economic Activity
making, providing, purchasing or selling goods and services
Anthing that involves producing, distributing or consuming goods and services
economic activity
The variable used to measure economic activity is the
GROSS DOMESTIC PRODUCT (GDP)
GDP measures
TOTAL value of all the goods and services that are produced in the economy over a period of time.
Market value
means that the goods and services are traded in the market place.
Final goods and services
Are the final thing like car or hotel
Produced in a country in a given period of time
this is referred to as DOMESTIC PRODUCT produced in that particular year.
The UAE has a diversified economy. Its GDP is generated from the following key sectors:
oil and gas
real estate and construction
toursim
trade and commercial
financial services
aviation
GDP components
GDP = C + I + G + NX
GDP = C + I + G + NX
Consumption (C) : the amount of goods and services used by households in an economyInvestment (I) : the purchase of goods that are not consumed in the current period, but are used in the future to produce more goods and services ex ; laptop Government Spending (G)
: this refers to mone spent by the public sector on thepurchase of goods and provision of services such as education, healthcare, defense.
Imports (M) : a good or service bought in one country that was produced in another like cars
Exports (X ) : a good or service produced in one country and sold to a foreign country
Net Exports(NX) : Exports Less Imports
Households provide the factors of production with which firms produce goods and services
notional product
Firms reward the households for the factors of production
notional income
Households spend their income on the goods and services produced by the firms
NATIONAL EXPENDITURE
Since we assume that households receive income for the factors of production they provide businesses with (NY)
and households spend the income their receive on the consumption of goods and services (NE)
And that all the goods and services that households consume are produced by businesses in the economy.
This means that the total of
NP = NE = NY
Which leads us to conclude that the size of the economy, the GDP, can be measured either by calculating
NP, NY or NE
S, T, M ARE LEAKAGES
HH do not spend all their money on goods and services
produced in the domestic economy.
Some of their income is SAVED, paid to government in the
form of Taxes, or paid to foreign countries in the form of IMPORTS
saving
taxe
import
I, G, X ARE INJECTIONS
Banks lend money to firms and HH who use the loans to finance
INVESTMENT. Governments use the taxes they receive in the form
of GOVERNMENT SPENDING. Businesses receive money from
Foreigners who pay for exports from the country
I = INVESTMENT
G= GOVERNMENT SPENDING
X= EXPORTS
If water is being lost from the drain at the bottom of the bath tub
If water is being lost from the drain at the bottom of the bath tub LEAKAGES = Savings, Taxes and Imports
If water is being added because the tap / faucet is dripping
If water is being added because the tap / faucet is dripping
= INJECTIONS
= Investments, Government Spending, Exports
Then, when total LEAKAGES = total INJECTIONS
S+ T + M = I + G + X
Consumer durables
are long-lived consumer goods : cars, furniture, appliances
Consumer non-durable goods
Are short lived-goods:clothing food
Services
Are the largest component of consumer spending ex: Education, medical services
Investment
is spending by firms on final goods and services
Business fixed investment
includes purchases of new capital goods
such as factory plants, property, equipment
Business fixed investment
Residential investment
is construction of new homes and apartment buildings
