Chapter 4: GDP - Assignment Essays

question

Gross Domestic Product (GDP)

answer

GDP is the market value of all final goods and services produced in a country in a given time period

question

Market Value

answer

The prices at which items are traded in markets

question

Final Good

answer

An item bought by its final user during (or service) a specified time period

question

Intermediate Good

answer

An item produced by one firm, bought by another firm, and used as a component of a final good or service

question

Why does GDP not include intermediate goods?

answer

To avoid double counting

question

GDP measures only goods and services

answer

-Produced within a country

-In a specific time period

question

Expediture approach

answer

Link between income and production

question

Income approach

answer

Link between productivity and living standards

question

Consumption Expenditure

answer

Total payment of consumer goods and services

-Households (buy consumer)

-Firms (sell consumer)

question

Investment Expenditure

answer

Purchases of new capital the addition to inventories

-Firms (buy and sell new capital equipment and any unsold output goes into inventory)

question

Government expenditure

answer

-Government (buy and payed for by taxes)

question

Net Exports

answer

-Exports (domestic firms buy)

-Imports (domestic firms sell)

question

X>M

answer

Domestic firms -> rest of the world

question

X<M

answer

Rest of the world -> domestic firms

question

Aggregate Income

answer

Total amount paid for the use of the factors of production

question

Factor Market

answer

-Households (sell services)

-Firms (buy services)

question

Gross National Product

answer

Value of goods and services produced anywhere in the world by residents of a nation

question

Domestic Product

answer

Means produced within a country

question

Domestic Product contrasts with

answer

National Product

question

Gross

answer

Before the depreciation of capital

question

Net

answer

Opposite of gross

question

Depreciation

answer

Is the decrease in value of a firm's capital that results from wear and tear and obsolescence

question

Gross Investment

answer

Is the total amount spent on purchases of new capital and on replacing depreciated capital

question

Measures US GDP

answer

Summing the incomes that firms pay households for the factors of production they hire

question

Internal Revenue Service (IRS)

answer

Where the Bureau of Economic Analysis collects their data

question

Compensation for employees

answer

Payments for labor services (wages)

question

Other Factor Income

answer

Earned by capital, land, entrepreneurship

question

BEA splits into 2 categories

answer

Compensation for employees and other factor income

question

Market prices are higher than factor costs due to

answer

Indirect taxes

question

Subsidies

answer

Make the market price lower than factor costs

question

Nominal GDP

answer

The value of final goods and services produced during a given year at the prices that prevailed in that same year

question

Real GDP

answer

The value of final goods and services produced during a given year when valued at the prices of a reference based year

question

Standard of living over time

answer

Tells us the value of goods and services that the average person can enjoy

question

Expansion

answer

Period during which rGDP persistently increases

question

Recession

answer

Period during which rGDP persistently decrease

question

Peak

answer

Turning point from expansion to recession

question

Trough

answer

Turning point from recession to expansion

question

The Standard of living across countries

answer

rGDP per person in one country must be converted into the same currency units of the other country

question

Potential GDP

answer

The value of real GDP when all of the economies labor, land, capital, and entreprenerial ability are "fully employed"

question

Business Cycle

answer

The fluctuation of real GDP around potential GDP

-Periodic but irregular up-and-down movement of total production and other measures of economic activity

question

Limitation of rGDP

answer

-Household production

-Underground Economic Activity

-Leisure Time

-Environmental Quality

question

Underground Economic Activity

answer

Economic activity purposely hidden from the views of the government to avoid taxes and regulation, or goods are illegal

question

Features of Expanding Living Standards

answer

The growth of potential GDP and business cycle

1 of 43

question

Gross Domestic Product (GDP)

answer

GDP is the market value of all final goods and services produced in a country in a given time period

question

Market Value

answer

The prices at which items are traded in markets

question

Final Good

answer

An item bought by its final user during (or service) a specified time period

question

Intermediate Good

answer

An item produced by one firm, bought by another firm, and used as a component of a final good or service

question

Why does GDP not include intermediate goods?

answer

To avoid double counting

question

GDP measures only goods and services

answer

-Produced within a country

-In a specific time period

question

Expediture approach

answer

Link between income and production

question

Income approach

answer

Link between productivity and living standards

question

Consumption Expenditure

answer

Total payment of consumer goods and services

-Households (buy consumer)

-Firms (sell consumer)

question

Investment Expenditure

answer

Purchases of new capital the addition to inventories

-Firms (buy and sell new capital equipment and any unsold output goes into inventory)

question

Government expenditure

answer

-Government (buy and payed for by taxes)

question

Net Exports

answer

-Exports (domestic firms buy)

-Imports (domestic firms sell)

question

X>M

answer

Domestic firms -> rest of the world

question

X<M

answer

Rest of the world -> domestic firms

question

Aggregate Income

answer

Total amount paid for the use of the factors of production

question

Factor Market

answer

-Households (sell services)

-Firms (buy services)

question

Gross National Product

answer

Value of goods and services produced anywhere in the world by residents of a nation

question

Domestic Product

answer

Means produced within a country

question

Domestic Product contrasts with

answer

National Product

question

Gross

answer

Before the depreciation of capital

question

Net

answer

Opposite of gross

question

Depreciation

answer

Is the decrease in value of a firm's capital that results from wear and tear and obsolescence

question

Gross Investment

answer

Is the total amount spent on purchases of new capital and on replacing depreciated capital

question

Measures US GDP

answer

Summing the incomes that firms pay households for the factors of production they hire

question

Internal Revenue Service (IRS)

answer

Where the Bureau of Economic Analysis collects their data

question

Compensation for employees

answer

Payments for labor services (wages)

question

Other Factor Income

answer

Earned by capital, land, entrepreneurship

question

BEA splits into 2 categories

answer

Compensation for employees and other factor income

question

Market prices are higher than factor costs due to

answer

Indirect taxes

question

Subsidies

answer

Make the market price lower than factor costs

question

Nominal GDP

answer

The value of final goods and services produced during a given year at the prices that prevailed in that same year

question

Real GDP

answer

The value of final goods and services produced during a given year when valued at the prices of a reference based year

question

Standard of living over time

answer

Tells us the value of goods and services that the average person can enjoy

question

Expansion

answer

Period during which rGDP persistently increases

question

Recession

answer

Period during which rGDP persistently decrease

question

Peak

answer

Turning point from expansion to recession

question

Trough

answer

Turning point from recession to expansion

question

The Standard of living across countries

answer

rGDP per person in one country must be converted into the same currency units of the other country

question

Potential GDP

answer

The value of real GDP when all of the economies labor, land, capital, and entreprenerial ability are "fully employed"

question

Business Cycle

answer

The fluctuation of real GDP around potential GDP

-Periodic but irregular up-and-down movement of total production and other measures of economic activity

question

Limitation of rGDP

answer

-Household production

-Underground Economic Activity

-Leisure Time

-Environmental Quality

question

Underground Economic Activity

answer

Economic activity purposely hidden from the views of the government to avoid taxes and regulation, or goods are illegal

question

Features of Expanding Living Standards

answer

The growth of potential GDP and business cycle

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