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National Income and Product Accounts / National Accounts
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Keeps track of the flows of money bw different sectors of the economy
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Consumer Spending
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Household spending on goods and services
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Stock
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Shared ownership of a company held by a shareholder
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Bond
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borrowing in the form of an IOU that pays interest
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Government Transfers
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Payments by the government to individuals for which no good or service is provided in return.
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Disposable Income
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Equal to income plus government transfers minus taxes, is the total amount of household income available to spend on consumption and to save.
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Private Savings
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Equal to disposable income minus consumer spending, is disposable income that is not spent on consumption.
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Financial Markets
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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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Government Borrowing
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The total amount of funds borrowed by federal, state, and local governments in the financial markets.
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Government Purchases of Goods and Services
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Total expenditures on goods/services by federal, state, and local governments.
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Inventories
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Stocks of goods and raw materials held to facilitate business operations
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Investment Spending
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Spending on productive physical capital-such as machinery and construnction of buildings-and on changes to inventories.
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The rest of the world participates in the US economy in 3 ways
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1. Imports
2. Exports
3. Foreign lending/borrowing
2. Exports
3. Foreign lending/borrowing
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Final Goods/Services
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Goods/services sold to the final, or end, user
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Intermediate Goods/Services
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Goods/services-bought from one firm by another- that are inputs for production of final goods and services
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Gross Domestic Product (GDP)
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The total value of all final goods and services produced in the economy during a given year.
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Aggregate Spending
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The sum of consumer spending, investment spending, gov purchases of goods and services, and exports minus imports, is the total spending on domestically produced final goods and services in the economy.
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3 Methods for Calculating GDP
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1. Adding up total value of all final goods and services produced
2. Adding up spending on all domestically produced goods and services
3. Adding up total factor income earned by households from firms in the economy
2. Adding up spending on all domestically produced goods and services
3. Adding up total factor income earned by households from firms in the economy
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Value added
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The value of a producer's sales minus the value of its purchases of intermediate goods and services
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Net Exports
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The difference bw the value of exports and the value of imports
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Aggregate Output
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The economy's total quantity of output of final gooods and services
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Real GDP
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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.
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Nominal GDP
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The value of all final goods and services produced in the economy during a given year, calculated using the prices current in the year which output is produced.
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Chained Dollars
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The method of calculating changes in real GDP using the average bw the growth rate calculated using an early base year and the growth rate calculated using a late base year.
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GDP per Capita
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GDP divided by the size of the population; it is equivalent to the average GDP per person.
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Aggregate Price Level
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A measure of the overall level of prices in the economy
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Market basket
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A hypothetical set of consumer purchases of goods and services
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Price index
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Measures the cost of purchasing a given market basket in a given year, where that cost is normalized so that it is equal to 100 in the selected base year
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Inflation Rate
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The percent change per year in a price index - typically the consumer price index
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Consumer Price Index (CPI)
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Measures the cost of the market basket of a typical urban American family.
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Producer Price Index (PPI)
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Measures changes in the prices of goods purchased by producers
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GDP Deflator
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100 times the ratio of a nominal GDP to real GDP in that year
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