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