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chapter 5
| Question | Answer |
|---|---|
| income per capita | average income per person in a country calculated by dividing a nation's aggregate (total) income by the number of ppl in that country |
| national income accounts | measure of the level of aggregate economic activity in a country |
| national income and product accounts (NIPA) | the system of national income accounts used in the united states |
| how aggregate economic activity in a country can be measured (3 diff ways) | production approach, expenditure approach, income approach, all used to measure GDP (gross domestic product) |
| production approach | the market value of output produced, adds market value of the final goods and services produced within the borders of a country during a particular time |
| expenditure approach | amount of spending by purchasers, based accounting sums up the purchases of final goods and services produced within a nation during a specified period of time |
| income approach | income generated by production |
| gross domestic product (GDP) | market value of the final goods and services within the borders of a country during a particular time period omits depreciation of physical capital stock & resources, illegal transactions, non market transactions, negative consequences of production |
| value added | measures how much value is added in the different stages of production, Value added= sales revenue - purchases of intermediate products from other firms |
| consumption (C) | the value of new consumption goods and services bought by domestic households, except residential construction DOES NOT include used goods as they were counted the year they were produced |
| investment (I) | market value of new physical capital bought by domestic households & domestic firms include: new resident construction, increase in firm inventory holding; business structure, equipment & intellectual property product (software. research , development) |
| government expenditure (G) | market value gov. expenditures on new goods & services include purchase of good & service, spending on capital good that add to nation capital stock i.e roads exclude transfer payments (social security/unemployment) & interest payments on gov. debt |
| exports (X) | market value of all new goods and services produced domestically and sold abroad to foreign households, firms, and governments. |
| imports (M) | the market value of goods and services produced abroad and sold domestically to households firms, and governments |
| Income approach | All final goods and services are produced using factors of production. Income based accounting sums up payments received by workers for their work (or labor income) and payments to the owners of physical or financial capital (or capital income) |
| labor income | compensation of employees includes the wages, salaries, fringe benefits, social security contributions, and health and pension plans |
| capital income | includes renter income, interest, proprietor's income, corporate profits. |
| Final goods and services | don't count intermediate goods and services (those used up in the production of other goods and services in the same period that they themselves were produced) |
| what GDP records | production in US regardless of whose labor and capital is used |
| what gross national product (GNP) records | records production of domestically owned labor and capital in the US and abroad and subtracts foreign owned production occurring domestically |
| GDP increase | records increases in actual production and increases in prices of those goods and services |
| Nominal GDP | total value of production using current market prices to determine the value of each unit that is produced |
| Real GDP | The total value of production using market prices from a specific base year to determine the value of each unit that is produced |
| Real GDP growth | growth rate of the real GDP |
| inflation rate (π) | the percentage change in a price index: the GDP deflator or the CPI |
| GDP deflator | the ratio of nominal to real GDP |
| CPI (consumer price index) | the price level of a particular basket of consumer goods and services |
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