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| market activity; its a flow |
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Consumption + Investment + Government Spending + Net exports C+ I + G + (X-M) |
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| Intermediate goods can be eliminated from GDP in two ways: |
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1. measuring only final sales 2. measure only value added |
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Net Domestic Product is... |
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| Net Domestic Product (NDP) represents |
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| output available for purchase |
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Difference between GDP and GNP |
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Definition
- GDP describes the economic output produced withing the physical borders of an economy
- GNP describes the economic output produced by the citizens of a country
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| Why can GDP be a poor measure of relative living standards of living |
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| it measures only market activities |
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| To compare income over time, we must _____ price-level changes |
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| After adjusting for inflation, nominal mearsures are changed to |
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Definition
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| Equation for percent change in real GDP |
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| % change in Real GDP= % change in Nominal GDP - Inflation |
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Real GDP= Nominal GDP X 100 GDP Deflator |
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- doesn't measure economic welfare
- doesn't include transactions in the underground economy
- price index used is problematic
- subcategories of GDP are often interdependent
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| GDP includes only goods sold to.... |
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Definition
| consumers. Sales to other firms are intermediate goods and social security benefits don't reflect production |
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| In calculating GDP, the largest component of total U.S. expenditures is |
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Definition
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| The components that balances aggregate income and aggregate production is: |
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Definition
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If a country's population grows at a faster rate than its GDP, then its per capita GDP |
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| GDP measures market activity and excludes |
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| the total market value of all final goods and services produced in a one-year period |
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| GDP plus net forgein factor income |
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| Net foreign factor income is obtained by |
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Definition
| adding the foreign income of one's citizens and subtracting the income of residents who aren't citizens |
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| Four components that comprise aggregate income are: |
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| compensation to employees, rents, interest, and profits |
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| Total value of production always equals |
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Definition
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Definition
real output= (nominal output/deflator) X 100 |
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| Nominal Output (equation) |
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Definition
| nominal output= (real output X deflator)/ 100 |
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