Chap 7 Econ vocab

nominal GDP

GDP measured in terms of the price level at the time of measurement; GDP not adjusted for inflation. Compare with real gross domestic product (real GDP).

expenditures approach

The method that adds all expenditures made for final goods and final services to measure the gross domestic product.

income approach

The method that adds all the income generated by the production of final goods and final services to measure the gross domestic product.

gross domestic product

The total market value of all final goods and final services produced annually within the boundaries of a nation.

value added

The value of a product sold by a firm less the value of the products (materials) purchased and used by the firm to produce that product.

base year

The year with which other years are compared when an index is constructed; for example, the base year for a price index.

multiple counting

mistake of including sales value of intermediate goods in GDP

price index

An index number that shows how the weighted-average price of a "market basket" of goods changes over time relative to its price in a specific base year.

disposable income

Personal income less personal taxes; income available for personal consumption expenditures and personal saving.

Intermediate goods and services

Products that are purchased for resale or further processing or manufacturing.

final goods and services

Products that have been purchased for final use (rather than for resale or further processing or manufacturing.)

nondurable goods

A consumer good with an expected life (use) of less than three years

durable goods

A consumer good with an expected life (use) of three or more years.

taxes on production and imports

A national income accounting category that includes such taxes as sales, excise, business property taxes, and tariffs that firms treat as costs of producing a product and pass on (in whole or in part) to buyers by charging a higher price.

service

An (intangible) act or use for which a consumer, firm, or government is willing to pay.

consumption of fixed capital

An estimate of the amount of capital worn out or used up (consumed) in producing the gross domestic product; also called depreciation.

net domestic product

An estimate of the amount of capital worn out or used up (consumed) in producing the gross domestic product; also called depreciation.

government purchases

Expenditures by government for goods and services that government consumes in providing public services as well as expenditures for publicly owned capital that has a long lifetime; the expenditures of all governments in the economy for those final goods and final services.

gross private domestic investment

Expenditures that increase the nation's stock of capital, which is the collection of physical objects and intangible ideas that help to produce goods and services. Includes spending on final purchases of plant, machinery, and equipment by business enterprises; residential construction; changes in inventories; expenditures on the research and development (R&D) of new productive technologies; and money spent on the creation of new works of art, music, writing, film, and software.

real gdp

Gross domestic product adjusted for inflation; gross domestic product in a year divided by the GDP price index for that year, the index expressed as a decimal. Compare with nominal GDP.

net private domestic investment

Gross private domestic investment less consumption of fixed capital; the addition to the nation's stock of capital during a year.

gross output

The dollar value of the economic activity taking place at every stage of production and distribution. By contrast, gross domestic product (GDP) only accounts for the value of final output.

personal income

The earned and unearned income available to resource suppliers and others before the payment of personal taxes.

personal consumption expenditures

The expenditures of households for both durable and nondurable consumer goods.

national income accounting

The techniques used to measure the overall production of a country's economy as well as other related variables.