Chapter 7 Flashcards

1
Q

National income and product accounts

“national accounts”

A

Keep track of the flows of money between different sectors of the economy

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2
Q

Consumer spending

A

Household spending on goods and services

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3
Q

Stock

A

A share in the ownership of a company held by a shareholder

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4
Q

Bond

A

Borrowing in the form of an IOU that pays interest

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5
Q

Dvidiends

A

profits distributed to shareholders

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6
Q

Government transfers

A

Payments by the government to individuals for which no good or service is provided in return

Ex. Social Security, unemployment insurance

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7
Q

Disposable income

A

Income + government transfers - taxes = d.income

The total amount of household income available to spend on consuption and save

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8
Q

Private savings

A

Disposable income that is not spent on consumption

Disposable income - Consumer spending

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9
Q

Financial markets

A

The banking, stock, and bond markets, which channel private savings and foreign lending into investment spending, government borrowing, and foreign borrowing

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10
Q

Gross domestic product

A

The value of all the final goods and services provided

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11
Q

Government borrowing

A

The total amount of funds borrowed by federal, state, and local governments in the financial markets

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12
Q

Government purchases of goods and services

A

Total expenditures on goods and services by federal, state, and local governments

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13
Q

Exports

A

Goods and services sold to other countries

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14
Q

Imports

A

Goods and services purchased from other countries

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15
Q

Inventories

A

Stocks of goods and raw materials held to facilitate business operations

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16
Q

Investment spending

A

Spending on productive physical capital - such as machinery and construction of buildings, and on changes to inventories

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17
Q

final goods and services

A

Goods and services sold to the final, or end, user

18
Q

Intermediate goods and services

A

Goods and services bought from one firm by another firm that are inputs for production of final goods and services

19
Q

Gross Domestic Product (GDP)

A

The total value of all final goods and services produced in the conomy during a given year

20
Q

Aggregate spending

A

The sum of consumer spending, investment spending, government purchases of goods and services, and exports minus imports

=

Total spending on domestically produced final goods and services in the economy

21
Q

Third Way

GDP =

A

Sum the total factor income earned by households from firms in the economy

22
Q

3 ways of GDP calculation

A
  1. Adding up total value of all final goods and services provided
  2. Adding up spending on all domestically produced goods and services
  3. Adding to total factor income earned by households from firms in the economy
23
Q

Value added

A

The value of a producer’s sales minus the value of its purchases of intermediate goods and services

24
Q

Not included in GDP

A

Intermediate goods and services

Inputs

Used goods

Stocks and bonds

Foreign produced goods and services

25
Q

GNP

A

The total factor income earned by residents of a country

excludes: factor income earned by foreigners (profits to foreign investors on american stocks or payments to foreigners working in US)
includes: americans who work abroad temporarily and american companies profiting in foreign countries

26
Q

Aggregate output

A

The economy’s total quantity of output of final goods and services

27
Q

Real GDP

A

The total value of all final goods and services produced in the economy during a given year, calculated using the prices of a selected base year

28
Q

Nominal GDP

A

The value of all final goods and services produced in the economy during a give year

Calculated using the prices current in the year in which the output is produced

29
Q

Chained dollars

A

The method of calculating changes in real GDP using the average between the growth rate calculated using an early base year and the growth rate calculated using a late base yera

30
Q

GDP per capita

A

GDP divided by the size of the population

The equivalent to the average GDP per person

31
Q

Aggregate price level

A

A measure of the overall level of prices in the economy

32
Q

Market basket

A

A hypothetical set of consumer purchases of goods and services

33
Q

Price index

A

Measures the cost of purchsing a given market basket in a given year, where that cost is normalized so that it is equlal to 100 in the selected base year

34
Q

Inflation rate

A

The percent change per year in a price index - typically the consumer price index

35
Q

Consumer price index (CPI)

A

Measures the cost of the market basket of a typical urban American family

36
Q

Price index formula

A

Cost of market basket in a given year

Cost of market basket in base year

X 100

37
Q

Inflation rate formula

A

Price index in year 2 - Price index in year 1

Price index in year 1

X 100

38
Q

Producer Price index (PPI)

A

Measures changes in the prices of goods purchased by producers

39
Q

GDP deflator

A

100 times the ratio of nominal GDP to real GDP in a given year

40
Q
A