Eco 280 output and income

Exports vs net imports

Exports are goods, services, or resources produced domestically and sold abroad, while net exports are equal to exports minus imports.

government expenditures

Federal, state, and local government outlays for goods and services, including transfer payments. Add federal gov+ state and local expenditure together

what is not included in nominal GDP because it is produced somewhere else?

Imports

GDP Income Approach

National income+ indirect business taxes+ depreciation+ net foreign interest income

imports

because they aren't produced domestically, they needed to be subtracted from GDP

Total gross investment equation

business fixed investment+ Residential Fixed investment+ inventories

GDP price index

can be used to track prices from year to year (nominal GDP/ real GDP)x 100

in calculating real GDP we use

current year quantities and base year prices

net exports

difference between goods made Domestically and purchased by foreign consumers and goods made in other countries and purchased domestically net exports=exports-imports

net investment

difference between gross investment and depreciation of capital ( Depreciation is the percent as a number EX:9%- 9 million)

only_____ goods and services are included in GDP so that expenditures are not counted twice

final

GDP Excludes

goods and services that are not bought and sold in a market, goods and services traded through barter, activities that occur outside formal markets

durable goods

goods that last for a relatively long time, such as refrigerators, cars, and DVD players

Two largest components of GDP

government purchases and consumption

gross investment

how much capital is being created =nonresidential fixed investment+residential investment+ change in private inventories

consumption expenditure

includes all expenditures made by households on goods and services, such as clothing, food, electronics, and recreation Durable goods+nondurable goods+services=consumption expenditures

in economics_____ includes the purchase of housing, tools, factories, and tractors

investments

a final good or service

is one sold to the end user and is not used to produce another product for subsequent sale

The major difference between nominal GDP and real GDP is:

nominal GDP measures the value of output in current-year prices, while real GDP measures output using constant prices.

real GDP per capita

real GDP divided by the total population

investments

refers to spending by firms on capital goods designed to improve the future productivity of the firm

National Income

rent+ wages+interest+Profit and losses

government purchases

spending by federal, state, and local governments on goods and services Ex: the United States army buys a new armored tank from the lima Army Tank Plant

Nominal GDP

sum of all expenditures in the economy:consumption, gross investment, government purchases, and net exports Consumption expenditures+Gross investment+Federal government+state and local government+net export (if negative subtract) National income+ indirect business taxes+ depreciation+ net foreign interest income

capital stock

take the beginning capital and add the net investment

Nominal Gross Domestic Product

the dollar value of all final goods and services that are produced during a fixed period of time

GDP is imperfect measure of economic well-being because it fails to measure

the purchase of illegal goods

indicate which of the following are not included directly in the calculation of GDP

used goods and secondhand goods

real GDP tells

whether more was produced none year relative to another and how much output was produced in a country