Chapter 7: Measuring Domestic Output and National Income

Net Domestic Product

GDP - consumption of fixed capital (depreciation), measures total annual output that the economy can consume without impairing its capacity to produce in ensuing years

Real GDP

GDP that has been inflated/deflated to reflect changes in price level

Nominal GDP

GDP unadjusted for inflation

Price Index

a measure of the price of a specified collection of goods and services in a given year compared to the price of an identical collection of goods and services in a base year

Personal Consumption Expenditures (C)

all expenditures by households on goods and services

Gross Private Domestic Investment (Ig)

all final purchases of machinery, equipment, and tools by businesses, construction, and inventory changes

Personal Income

all income received whether earned or unearned

Gross Investment

all investment goods, those that replace other goods that were used up, any net additions to the economy's stock of capital

Depreciation

amount of capital that is used up over the course of a year

Aggregate Output

annual total output of goods and services

Income Approach

based on the income derived from its production

Gross Domestic Product

dollar value of all final foods and services produced within the borders of a country during a period of time

Government Purchases (G)

expenditures for goods and services that government consumes providing public services, expenditures for publicly owned capital with long lifetimes

Net Exports (Xn)

expenditures used to purchase goods and services produced within the goods sold to other countries, exports minus imports

Nonproduction Transaction

include public transfer payments, private transfer payments, stock market transactions, and secondhand sales which are not include in GDP calculation

Net Private Domestic Investment

includes only investment in the form of added capital

Monetary Measure

measured value of output in monetary terms

National Income Accounting

measures the economy's overall performance, assess health of the economy by comparing production levels, tracking the long run course, and formulating policies

Disposable Income

personal income minus personal taxes (income, property, and inheritance taxes), this number can be divided between consumption and savings

Final Goods

products that are purchased by their end users

Intermediate Goods

products that are purchased for resale or further processing or manufacturing

Durable Goods

products that have expected lives of 3 years or more

Nondurable Goods

products with less than 3 years of expected life

Market Basket

specified collection of goods and services

Net Foreign Factor Income

take out income foreigners gain by supplying resources abroad and add income foreigners gain by supplying resources in the United States

Consumption of Fixed Capital

the allowance for capital that has been consumed in producing the year's GDP

Value Added

the market value of a firm's output minus the value of the inputs the firm has bought from others

Expenditures Approach

the sum of all the money spent in buying a good/service

National Income

the total of all sources of private income and government revenue from taxes on production and imports (includes compensation of employees, rent, interest, proprietor's income, corporate profits, taxes on production and imports)

Services

the work done by service providers

Multiple Counting

would occur if the value of intermediate gods were included, and would distort the value of GDP