Macro

What is a durable good?

A good that does not wear out and has utility over time rather than being used up in one use.

What is a transfer payment?

A payment of money from government to a household for which the payer receives no good or service in return.

What is depreciation?

Capital that is used up, the amount of value lost as equipment and other capital are used up in the production process.

What is gross private domestic investment composed of?

All construction and tool purchases are considered investment, even home purchases.

Suppose GDP is $100 million, if personal consumption is $80 million, gross private domestic investment is $15 million, government spending is $10 million, and transfer payments are $10 million, then net exports must total

-5 million. (you don't calculate transfer payments)

Two methods of calculating GDP:

1. output (what is produced) 2. income (what is earned in the production of output)

What is gross investment minus depreciation?

Net investment, the investment that occurred over and above what it took to replace equipment used up in the production process.

An investment to an economist is when ...

Resources are devoted to increase future output.

What national income accounts calculate?

The actual value of the economy by measuring its main components and factoring for things like inflation, unemployment and transfer payments (to avoid double counting).

Consumption.

The biggest expenditures in the U.S. economy. About 2/3.

What is disposable income?

The portion of personal income that can be used for consumption or saving. it is equal to personal income minus personal taxes

What is an example of a transfer payment?

Welfare check.