Term
| Gross domestic product (GDP) is defined as the total market value ($) of all final goods and services produced within a country during a period of time. |
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Definition
| is defined as the total market value ($) of all final goods and services produced within a country during a period of time. |
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Term
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Definition
| we mean GDP is calculated over a year or quarter (i.e. 3 months). |
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Term
| By final goods and services we mean |
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Definition
| we count only the market value of goods and services purchased by a final user (not the market value of intermediate goods). |
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Term
| An intermediate good or service is a good or service that does represent some production but is used as an input into the production of another good or service. |
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Definition
For example, a tire put on a truck at the assembly line is an intermediate good.
When the entire truck is sold by a dealer to a consumer (the final user who will simply drive the truck), then the entire truck is now a final good. |
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Term
| By total market value we mean GDP is reported as a dollar amount, not as a total amount of stuff (even though GDP is supposed to be a measure of total production). |
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Definition
| GDP can be conceptualized as a sum of multiplications of quantities times prices. |
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Term
| GDP IS MEASURED USING MARKET VALUES ($$$), NOT QUANTITIES |
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Definition
| Even though GDP is supposed to be a measure of total production, it is NOT reported as a total quantity of stuff produced but as the total market value of the total quantity of all the stuff produced. |
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Term
| GDP IS THE TOTAL MARKET VALUE OF FINAL GOODS & SERVICES |
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Definition
| Intermediate goods aren’t counted because that would lead to multiple-counting the same production – we will understand this better when we consider the value-added approach later on. |
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Term
| GDP INCLUDES ONLY CURRENT PRODUCTION DURING THE YEAR |
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Definition
(we are after total production for the year, not total sales for the year)
Stuff produced last year sold this year doesn’t count in this year’s GDP.
Stuff produced this year, sold, and then re-sold as “used” during the same year; gets counted only once for the year. |
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Term
| GDP INCLUDES ANY PRODUCTION WITHIN A COUNTRY’S BORDERS |
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Definition
(regardless of whether the company is domestic or foreign)
So a car built in the US by KIA counts in GDP for the US, but not in GDP for South Korea. |
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Term
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Definition
1) Total market value of all final goods and services
2) Total spending on final goods and services
3) Total Value added =total produciton
4) total income=total production |
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Term
| Final goods counts the production at each- |
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Definition
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Term
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Definition
| production of each intermediate good and service of final good. |
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Term
| all value added gets distributed as |
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Definition
income 1. Rent
2. interest
3. wages
4. profit |
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Term
| GDP--> Total Market vlaue of all final goods and services---> Total Spending on final Goods and service---> Total value added---> total income |
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Definition
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Term
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Definition
| The difference between how much we pay for the ingredients used to make something, and how much we sell what we make out of those ingredients, is called |
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Term
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Definition
| value-added is a dollar amount that represents the amount of production that has taken place during the productive process that transformed those ingredients into something else. |
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Term
| The first step in the production process has no value added |
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Definition
| The sheep from the farmer has no value added only from the farmer to the wool processer is it then considered value-added |
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Term
| All value added will be distrubuted as income |
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Definition
| 1. rent 2.wages 3.interest 4. profit |
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Term
| that the total market value of all final goods & services equals total spending on all final goods & services. |
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Definition
One of the two ways that GDP is actually accounted for (also known as total production) Although there are four methods only two are used by the national income accountants.
1. total market value of final goods and services
2. Total spending on final goods and service
3. Total of all value added
4. total income |
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Term
| total value-added equals total income, but total value-added equals total production, so total income equals total production. |
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Definition
| Total income is the other way they actually use to count GDP |
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Term
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Definition
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Term
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Definition
| (aka X – M where X stands for exports and M stands for imports) |
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Term
| In national income accounting, investment expenditure is spending on capital goods only |
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Definition
| This is refereing to businesses and they only spend on Capital goods. |
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Term
| Unlike land, labor, & entrepreneurial ability, capital goods are produced by firms in the U.S. economy |
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Definition
| In addition, capital goods are final goods to business because business is the final user of capital goods |
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Term
| But spending by government on capital goods is counted as part of |
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Definition
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Term
| Personal Consumption Expenditure (which we will abbreviate as “C”) |
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Definition
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Term
| Investment Expenditure (abbreviated as “Ig” or “I” and called Gross Private Domestic Investment) |
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Definition
| Gross Private Domestic Investment (captial only) |
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Term
| Govt Expenditure (which we will abbreviate as “G” and call Government Purchases) |
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Definition
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Term
| Net Exports (which we will abbreviate as “Xn” or “X – M”) |
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Definition
| Net exports X=exports n=net |
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Term
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Definition
C= personal Consumption expenditures
I (sub) g= gross private dosmestic investment
G= government Expentiture or purchases
x sub n = Net Exports |
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Term
Exports are final goods and services produced in the United States but sold to foreigners.
Since exports is spending by foreigners only on US-produced goods & services, and GDP counts all final-good sales of US-produced goods & services, exports definitely count as part of US GDP. |
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Definition
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Term
| national income accounting scheme, investment expenditure is spending on capital goods only (i.e. investment is spending on capital only |
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Definition
| On Capital goods only by business = I (sub)g |
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Term
| “consumption of fixed capital” gets “siphoned-off” GDP and “sent” right back to U.S. businesses… |
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Definition
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Term
| gross private domestic investment Ig is greater than consumption of fixed capital |
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Definition
If Ig > consumption of fixed capital,
then the economy increases |
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Term
| gross private domestic investment Ig is less than consumption of fixed capital, then the amount of capital at the end of the year is smaller than the amount of capital at the beginning of the year: |
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Definition
Ig < consumption of fixed capital,
then the economy decreases |
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Term
| gross private domestic investment Ig is equal to consumption of fixed capital, then the amount of capital at the end of the year is equal to the amount of capital at the beginning of the year: |
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Definition
Ig = consumption of fixed capital,
then the economy neither increases nor decreases |
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Term
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Definition
Grooss domestic investment flow is made up CFC (consumption Fixed capital)
UCP= undeistributed corparate profits (stock dividends)
S= Savings from households that turn into loans from banks |
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Term
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Definition
| I (sub)g= CFS + ((((UCP + S))))) |
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Term
| net private domestic Investment, or often just called net investment, and abbreviated as I(sub) n: |
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Definition
| I (sub) n = Undistributed corpation profits + Savings (UCP +S) |
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Term
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Definition
| gross private domestic investment = Consumption of Fixed Capiatl + Investmetn net |
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Term
| CFC= Consumption of Fixed Captial |
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Definition
| remeber that this is only replacement if not replaced then the I(sub)g will decrease |
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Term
If In > 0
then the economy increases |
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Definition
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Term
If In < 0
then the economy decreases |
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Definition
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Term
If In = 0
then the stock of capital in the economy neither increases nor decreases |
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Definition
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Term
| intermediate good or service is a |
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Definition
| good or service that does represent some production but is used as an---- input---- into the production of another good or service |
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Term
| GDP can be conceptualized as a sum of multiplications of quantities times prices. |
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Definition
| as a sum of multiplications of quantities times prices. |
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Term
| sale (which from the buyers viewpoint is |
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Definition
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Term
distrubuted as income Land=
labor=
Capiital=
Entreprenuer ability= |
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Definition
land =rent
labor=wages
Captial=interst
Entreprenuer ability=Profit |
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Term
| But any government spending on land, labor, & entrepreneurial ability and any business spending on land, labor, and entrepreneurial ability |
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Definition
| will not be counted towards GDP because, unlike capital, these resources are not a final good or service produced by firms in the economy. |
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Term
| But capital goods are final goods to businesses and to the government (when it acts like a business |
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Definition
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Term
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Definition
| Total expenditures =GDP = Total Income |
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Term
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Definition
| just a fancy accounting term that refers to the “using-up” of capital. |
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Term
| “consumption of fixed capital” gets |
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Definition
| “siphoned-off” GDP and “sent” right back to U.S. businesses… |
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Term
| “replaced” “consumption of fixed capital” = |
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Definition
| then the net change in the amount of capital in the economy is zero. |
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Term
| If U.S. businesses spend more to replace capital = |
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Definition
| (more production) than the value of the amount of capital that was used-up over the year, then we end-up with more capital at the end of the year than we did at the beginning of the year. |
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Term
| But if U.S. businesses spend less to replace capital = |
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Definition
| (less production) than the value of the amount of capital that was used-up over the year, then we end-up with less capital at the end of the year than we did at the beginning of the year. |
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Term
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Definition
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Term
| So, the part of Ig (the part made-up of UCP+S) that increases the total stock of capital in the economy (unlike the part that just pays for depreciation which consists of CFC), is private domestic investment without the “gross” prefix, or just net private domestic Investment, or often just called net investment, and abbreviated as In: |
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Definition
| This means that only ucp + s (Isub n) increases total stock of capital in the economy |
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Term
| Net Domestic Product or NDP. = |
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Definition
| GDP minus CFC (consumption of fixed capital (depreciation) |
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Term
| NDP (national dosmetic product) represents |
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Definition
| incomes earned within US borders. |
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Term
| NDP + Foreign Factor income( income earned by Americans, regardless of whether they earned the income in the US or outside of the US.) = |
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Definition
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Term
| Nominal values are values for which the effects of price changes (e.g. higher prices) have not been factored-out. |
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Definition
| Contains inflation from the rise of prices |
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Term
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Definition
| Nominal GDP divided by the GDP deflator (which was the GDP reported by the Marcorecomists divided by 100) |
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Term
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Definition
| divide something called the “GDP Deflator reported by macroeconomists”, by 100. |
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Term
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Definition
Work force
I. Labor force II.not in labor force
A)employed B)Unemployed A) Avalable B)Not Available
1.Frictional
2)Structrual
3) Cyclical |
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Term
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Definition
| unemployed divided by labor force time 100 |
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Term
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Definition
Frictional Unemployment
Structural Unemployment
Cyclical Unemployment |
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Term
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Definition
Short-term unemployment arising from the process of matching workers with jobs (or workers matching themselves with jobs). This unemployment is short-term because workers sometimes voluntarily refuse to take a job (“drag their feet”, which creates “friction”) because they do not believe the job matches their qualifications (or specifications); but they always eventually take a job offer.
""Cherry Pickers"" |
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Term
Structural Unemployment
Long-term unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs. This unemployment is long-term because workers are sometimes involuntarily unemployed when the skills they possess are no longer needed (obsolete); and these workers need to be re-trained (which takes time |
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Definition
| Long-term unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs. This unemployment is long-term because workers are sometimes involuntarily unemployed when the skills they possess are no longer needed (obsolete); and these workers need to be re-trained (which takes time ""Obsolete"" |
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Term
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Definition
| Unemployment caused by a business cycle recession. This kind of unemployment occurs because the economy has not generated a large enough number of jobs to employ all those who want to work and are looking for work. |
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Term
| The Natural Rate of Unemployment |
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Definition
The rate of unemployment consisting of the sum of
the structural rate of unemployment
plus
the frictional rate of unemployment |
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Term
| When the economy is at a peak the Cyclical employment is equal to zero |
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Definition
| Which means the U (unemployment is equal to Natural Rate because the U= NR+C |
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Term
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Definition
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Term
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Definition
| potential real GDP (if is ON the production possibility curve and not below it(((inside the curve)) |
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Term
| think of Potential Real GDP is |
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Definition
| as “the level of real GDP that the economy would produce if it were operating on it’s production possibilities curve”. |
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Term
| ***Production Possibility Curve= 5 assumtions |
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Definition
1) limited resources
2) No change in the resources
3) full employment (cyclical employ=0)
4) no change in technoloy
5) productive effenciency |
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Term
| Actual Real GDP falls short of Potential Real GDP (such as at point inside the possiblitty curve), there must be some cyclical unemployment |
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Definition
| NR there will always be some of (frictional and Structual) but when actual GDP falls below Potential GDP then C>0 |
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Term
| Actual Real GDP equals Potential Real GDP only at (or around) |
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Definition
| the peaks of the business cycle. |
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Term
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Definition
1) Potential Buyer (demand)
2) Potentail Seller (supply)
3) interaction betweeen seller and buyer |
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Term
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Definition
| is an economic model-amount of product that a buyer is willing to pay |
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Term
| Demand = Inverse realtionship |
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Definition
| (only if you have cetris parabis) |
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Term
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Definition
| alwasys has an inverse relationship between PRICE and QUANTITY |
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Term
| vOILATION OF CETERIS PARABIS MEANS |
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Definition
| There is no inverse relationship |
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