McConnell Brue Economics (Chapter 6) – Flashcards
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national income accounting
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Techniques used to measure the overall production of the economy and other related variables for the nation as a whole
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gross domestic product (GDP)
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the total market value of all the final goods and services produced in a given year
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intermediate goods
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goods and services that are purchased for resale or for further processing or manufacturing
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final goods
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goods and services that are purchased for resale or for final use by the consumer, not for resale or further processing
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multiple counting
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wrongly including the value of intermediate goods in the gross domestic product; counting the same good or service more than once
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value added
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the market value of a firm's output minus the value of the inputs the firm has bought from others
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public transfer payment
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Ex: Social Security payments, welfare payments, and veterans' payments that the government makes directly to households
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private transfer payments
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Ex:money that parents five to their children ot the cash gifts at Christmas time
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Stock market transactions
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the buying and selling of stocks and bonds
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expenditures approach or output approach
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GDP is viewed as the sum of all the money spent in buying it
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expenditures approach
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C+I+G+Xn
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income approach or allocations approach
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GDP is viewed in terms of the income derived or created from producing it
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personal consumption expenditures (C)
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all expenditures by households on durable consumer goods (cars,refrigerators,video recorders), nondurable goods (bread, milk, vitamins, pencils, toothpaste), and consumer expenditures for services (of lawyers, doctores, mechanics, barbers)
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gross domestic investment (I)
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-all final purchases fo machinery, equipment, and tools by business enterprises -all construction -changes in inventories
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net domestic private investment *Net investment=gross investment-depriciation
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only investment in to form of added capital
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depriciation
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the amount of capital that is used up over the course of a year
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disinvesting
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using up more capital than it is producing
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government purchases (G)
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-expenditures for goods and services that government consumes in providing public services -expenditures for social capital such as schools and highways, which has long lifetimes
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net exports (Xn)
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exports - imports
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wages
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wages and salaries by bussiness and government to their employees
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rents
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the monthly payments tenants make to landlords and the lease payments corporations pay for the use of office space
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interest
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the money paid by private businesses to the suppliers of money capital and such items as the interest households receive on savings deposits, certificates of deposit, and corporate bonds
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proprietor's income
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the net income of sole proprietorships, partnerships, and other unicorporated businesses; and corporate profits
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corporate income taxes
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taxes levied on corporations' net earnings and flow to the government
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dividends
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part of corporate profits that are paid to the corporate stockholders and thus flow to households
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undistributed corporate profits
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monies saved by corporations to be invested later in new plants and equipment (aka retained earnings)
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taxes on production and imports
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include general sales taxes, excise taxes, business property taxes, license fees, and customs duties
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national income *National income-net foreign factor income+stat. discrepency+depreciation
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all the income that flows to American supplied resources
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net foreign factor income
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receipts of resource income from the rest of the world minus payments of resource income to the rest of the world
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consumption of fixed capital or depreciation
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an estimate in the amount of capital worn out or used up (consumed) in producing the gross domestic product
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net domestic product (NDP) *NDP=GDP-depreciation
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GDP adjusted for depreciation
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*NI=
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NDP-stat. discrepancy+foreign income
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personal income (PI)
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the earned and unearned income available to resources suppliers and others before the payment of personal taxes
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Disposable Income (DI) *DI=C+S
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personal income - personal taxes;income available for personal consumption expenditures
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deflation
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decline in economy's price level
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inflation
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increase in economy's price level
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nominal GDP
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a GDP based on the prices that prevailed when the output was produced
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real GDP
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a GDP that has been deflated or inflated to reflect changes in the price level
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price index
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a measure of the price of specified collection of goods and services as compared to the price of an identical collection of goods and services in a reference year (aka "market basket")
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*Price index (in hundredths)=
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nominal GDP/real GDP
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*Price index in a given year =
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(price of market basket in specific year/price of market basket in base year) X 100
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chain-type annual-weight price index
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the GDP price index used in the United States
