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Eco- CH. 11 (GDP)
| Term | Definition |
|---|---|
| 3 Main MACRO Indicators (describing the state of the econ.) | 1) economic growth (INC GDP--> $28 T) 2) price level 3) unemployment rate |
| production method | P X Q (selling price X quantity prod. -G & S) |
| spending method | C + I + G + Nx --> net exports= exports-imports (consumers, businesses, gov't, other countries) |
| income method (factor income) | -income that flows --> households related to the production in spending of & for G & S rent + wages + interests + profits= $29 T (land, labor, physical capital, entrepreneurship) |
| 3 basic assumptions--flow diagram | 1. no gov't & no other countries 2. ALL money in/(income) is spent 3. no inflation (prices are stable) |
| GDP | total market value of all final goods & services produced within a country in 1 year |
| market value --3 ways to calculate GDP | final: GDP only counts finished products, NOT intermediate goods & raw materials -WITHIN A COUNTRY |
| Included in GDP | -domestically produced final G & S Business Investment Spending a) spending $ on physical capital that isn't used up in prod. process b) construction of all structures c) anything added to a business' inventory |
| Excluded (out) from GDP | 1. any spending on intermediate goods or inputs bc they're used up in prod. & are part of the value or final good 2. spending on used goods 3. any spending on financial assets (stocks & bonds) 4. any gov't spending on TRANSFER PAYMENTS |
| Excluded (out) from GDP (continued) | 5. non-market legal act. in spending (under table) 6. non-market illegal act. in spending (black market) |
| disposable income | factor income + gov't transfer payments - taxes |
| nominal GDP (current or money GDP) | -GDP NOT adjusted for inflation -current year output X current year selling prices |
| real GDP | -GDP adjusted for inflation -current year output/production X BASE YR. selling prices |
| base year | -year against which all other years are compared |
| real GDP per capita | -a.k.a income per person -this is the best way to compare countries economies real GDP ------------- pop. |
Created by:
bbell123
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