ECONTWO QUIZ 1

Value added approach

GDP is calculated using the output approach by summing the value of sales of goods and adjusting (subtracting) for the purchase of intermediate goods to produce the goods sold.

Industrial sector gross value added

Gross value added (GVA) measures the contribution to an economy of an individual producer, industry, sector or region.

Services gross value added

Gross value added (GVA) measures the contribution to an economy of an individual producer, industry, sector or region.

Factor incomes approach

It's possible to express the income approach formula to GDP as follows: Total National Income + Sales Taxes + Depreciation + Net Foreign Factor Income. Total national income is equal to the sum of all wages plus rents plus interest and profits.

Inflow(credit)

Liabilities

National Income

National income measures the monetary value of the flow of output of goods and services produced in an economy over a period of time.

Base year

Year used as the beginning or the reference year for constructing an index, and which is usually assigned an arbitrary value of 100.

Portfolio investments

are investments in the form of a group (portfolio) of assets, including transactions in equity securities, such as common stock, and debt securities, such as banknotes, bonds, and debentures.

Gross National Product(GNP)

is a broad measure of a nation's total economic activity. GNP is the value of all finished goods and services produced in a country in one year by its nationals.

Price deflator

is a measure of the level of prices of all new, domestically produced, final goods and services in an economy.

Gross Domestic Product(GDP)

is a monetary measure of the market value of all final goods and services produced in a period (quarterly or yearly) of time. Nominal GDP estimates are commonly used to determine the economic performance of a whole country or region, and to make international comparisons.

Trade deficit

is an economic measure of international trade in which a country's imports exceeds its exports. A trade deficit represents an outflow of domestic currency to foreign markets. It is also referred to as a negative balance of trade (BOT).

Gross domestic capital formation

is the addition to the capital stock within the domestic territory of a country during a year.

Net factor income from abroad

is the difference between the aggregate amount that a country's citizens and companies earn abroad, and the aggregate amount that foreign citizens and overseas companies earn in that country.

Expenditures approach

is the most widely used approach for estimating GDP, which is a measure of the economy's output produced within a country's borders irrespective of who owns the means to production. The GDP under this method is calculated by summing up all of the expenditures made on final goods and services.

Capital consumption allowance

is the portion of the gross domestic product (GDP) which is due to depreciation. The Capital Consumption Allowance measures the amount of expenditure that a country needs to undertake in order to maintain, as opposed to grow, its productivity.

Gross fixed capital formation

refers to the net increase in physical assets (investment minus disposals) within the measurement period. It does not account for the consumption (depreciation) of fixed capital, and also does not include land purchases.

Capital account

shows the net change in physical or financial asset ownership for a nation and, together with the current account, constitutes a nation's balance of payments.

Trade surplus

the amount by which the value of a country's exports exceeds the cost of its imports.

Agriculture, fishing and forestry gross value added

GDP

Official transactions

Financing the deficit by selling assets or by borrowing from abroad by monetary official authorities of a domestic nation (like transactions by the central bank)

Outflow(debit)

Assets.

Value added

In business, the difference between the sale price and the production cost of a product is the unit profit. In economics, the sum of the unit profit, the unit depreciation cost, and the unit labor cost is the unit value added.

Personal consumption expenditures

Is a measure of national consumer spending.

Current account

Is an important indicator of an economy's health. It is defined as the sum of the balance of trade (goods and services exports minus imports), net income from abroad, and net current transfers.

Balance of payments

These transactions consist of imports and exports of goods, services and capital, as well as transfer payments such as foreign aid and remittances.