42
Macroeconomics (Subject) / Chapter 21 (Lesson)
Advertisement
- Gross domestic product GDP The total maket value of all final goods and services produced within a given period by factors of production located within a country
- Final Goods and Services Goods and services produced for final use
- intermediate goods goods that are produced by one firm for use in further processing by another firm
- value added the difference between the value of goods as they leave a stage of production and the cost of the goods as they entered that stage
- yearly GDP goods and services produced within one year
- quarterly GDP goods and services that are produced within three months
- calculating GDP Two ways: 1. sum pup the value added at each stage of production (3 + 0.3 + 0.3 + 0.4 = 4.00) 2. take the value of final sales (4.00)
- Exclusion of Used Goods and Paper Transactions GDP is concerned only with new, or current production. Old output ist not counted in current GDP because it was already counted when it was produced. GDP is not the total market value of final sales during the period but rather the market value of total final production. Exp: The value of a house built in 2015 and sold in 2016 is counted in 2015's GDP Exp: 100 TVs produced in 2015 but only 30 sold in 2015, and 70 TVs sold in 2016. Still, the value of 100 TVs are contained in 2015 GDP. Sales of stocks and bonds are not counted in GDP. However, if you pay a fee to a broker to buy/sell stock shares, then this fee is included in GDP, because the broker genrated a service for you.
- gross national product GNP The total market value of all final goods and services produced within a given period by factors of production owned by a country's citizens, regardless of where the output is produced.
- expenditure approach A method of computing GDP that measures the total amount spent on all final goods and services during a given period.
- Advertisement
- income approach A method of computing GDP that measures the income - wages, rents, interest, and profits - received by all factors of production in producing final goods and services.
- 4 Categories of expenditure Personal consumption expenditures (C): household spending on consumer goods Gross private domestic investment (I): spending by firms and households on new capital, that is, plant, equipment, intventory, and new residential structures Government consumptiona nd gross investment (G) Net exports (EX - IM): net spending by the rest of the world, or exports minus imports
- durable goods goods that last a relatively long time, such as cars and household appliances
- nondurable goods goods that are used up fairly quickly, such as food and clothing
- services the things we buy that do not involve the production of physical things, such as legal and medical services and education
- gross private domestic investment (I) total investment in capital - that is the purchase of new housing, plants, equipment, and inventory by the private (or nongovernment) sector.
- nonresidential investment Expenditures by firms for machines, tools, plants, and so on.
- residential investment Expenditures by households and firms on new houses and apartment buildings.
- change in business inventories The amount by which firms’ inventories change during a period. Inventories are the goods that firms produce now but intend to sell later.
- equation GDP after expenditure approach GDP = C + I + G + (EX − IM)
- national income The total income earned by the factors of production owned by a country’s citizens
- compensation of employees Includes wages, salaries, and various supplements—employer contributions to social insurance and pension funds, for example—paid to households by firms and by the government.
- proprietors’ income The income of unincorporated businesses.
- rental income The income received by property owners in the form of rent.
- corporate profits The income of corporations.
- net interest The interest paid by business. (Remember: interest paid by government and households are not included in GDP)
- indirect taxes minus subsidies Taxes such as sales taxes, customs duties, and license fees less subsidies that the government pays for which it receives no goods or services in return.
- net business transfer payments Net transfer payments by businesses to others.
- surplus of government enterprises Income of government enterprises
- net national product NNP Gross national product minus depreciation; a nation’s total product minus what is required to maintain the value of its capital stock.
- Advertisement
- disposable personal income or after-tax income Personal income minus personal income taxes. The amount that households have to spend or save. Disposilbe income = Personal Income - Taxes
- personal saving The amount of disposable income that is left after total personal spending in a given period. Personal Saving = Disposible Income – Total Spending
- personal saving rate The percentage of disposable personal income that is saved. If the personal saving rate is low, households are spending a large amount relative to their incomes; if it is high, households are spending cautiously. (ie. I save 20% of my disposable income) Personal Saving Rate = 100*(Personal Saving / Disposible Income)
- Personal income The total income of households.
- retained earnings The income that goes to corporations only. (includes profits of corporations not paid to households in the form of dividends)
- informal economy The part of the economy in which transactions take place and in which income is generated that is unreported and therefore not counted in GDP.
- current dollars The current prices that we pay for goods and services.
- Nominal GDP Gross domestic product measured in current dollars. Nominal GDP is not a good measure to compare GDPs over time. Exp. Consider an economy that produces only computers. In 2015: 100 PCs, price $1000 each , GDP in 2015= $100,000 In 2016 : 100 PCs, price $1100 each , GDP in 2016= $110,000
- weight The importance attached to an item within a group of items.
- base year The year chosen for the weights in a fixed-weight procedure.
- fixed-weight procedure A procedure that uses weights from a given base year.
- calculating the GDP deflator Policy makers not only need good measures of how real output is changing but also good measures of how the overall price level is changing. The GDP deflator is one measure of the overall price level.