IB Economics Chapter 8 – Flashcards
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Business cycle
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Fluctuations in the growth of real output/ GDP, consisting of alternating periods of expansion and contraction.
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Circular flow of income model
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A model showing the flow of resources from consumers to firms, and the flow of products from firms to consumers as well as money flows consisting of consumers' income arising from the sale of their resources and the firms' revenues arising from the sale of their products.
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Closed economy
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An economy with no international trade.
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Consumption
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Spending by households on goods and services.
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Expenditure approach
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A method used to measure the value of aggregate out of an economy, which adds up all spending on final goods and services produced within a country within a given time period.
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Expenditure flow
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The flow of spending from households to firms to buy the goods and services produced by the firms.
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Green GDP
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Gross domestic product which has been adjusted to take into account environmental destruction.
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Government spending
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Spending undertaken by the government, as part of its fiscal policy or in order to meet specific economic or social objectives.
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Gross domestic product
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A measure of the value of aggregate output of an economy, it is the market value of all final goods and services produced within a country during a given time period.
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Gross national income (gross national product)
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A measure of the total income received by the residents of a country, equal to the value of all final goods and services produced by the factors of production supplied by the country's residents. GNO=GDP+income from abroad-income sent abroad.
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Interest
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A payment, per unit of time, to owners of capital resources.
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Income approach
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A method used to measure the value of aggregate output of an economy, which adds up all the income earned by the factors of production in the course of producing all goods and services within a country in a given time period.
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Income flow
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The flow of income of households that they receive by selling their factors of production to firms.
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Injections
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The entry into the income flow of funds corresponding to investment, government spending or exports.
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Investment
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Spending by firms or the government on capital goods and all spending on new construction.
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Leakages (withdrawals)
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The withdrawal from the income flow of funds corresponding to savings, taxes or imports.
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National income
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Total income of an economy.
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Net exports
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The value of exports minus the value of imports.
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Nominal GDP
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GDP measured in terms of current prices. Does not account for changes in price level.
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Nominal value
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Value measured in terms of prices that prevail at the time of measurement, and that do not account for changes in the price level.
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Open economy
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An economy that has international trade.
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Output approach
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A method used to measure the value of aggregate output of an economy, which calculates the value of all final goods and service produced in the country within a given time period.
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Price deflator (GDP deflator)
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A price index used to calculate real GDP from nominal GDP.
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Profit
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A payment, per unit of time, to owners of entrepreneurship.
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Rent
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A payment, per unit of time, to owners of land resources who supply their land to the production process.
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Real GDP
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Gross domestic product measured in constant prices: nominal GDP-inflation.
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Real value
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Value that has eliminated the influence of changes in the price level.
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Value of output flow
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The value of output that is sold by firms and purchased by consumers.
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Wages
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A payment, per unit of time, to those who provide labour.
