Gross Domestic Product (GDP)
Nominal GDP
Not adjusted for inflation and reflects final value of goods and services in current year prices
Government spending
Spending on anything from infrastructure to national defense; does not include transfer payments with no goods or services exchange, such as student aid
Investment spending
Spending to increase productivity or output in an economy
Disposable income
The money households actually have to spend after taxes are taken out
Items not included in GDP
- Purely financial transactions (stock purchases, public and private transfers) - Intermediate goods (flour used in making bread) - Secondhand sales (used goods) - Household productivity (repair your own car) - Leisure (chilling) - Underground economy (unreported tips and criminal activity) - Costs of pollution
Real GDP
Adjusted for inflation and is used to gauge health of economy
Formula for Aggregate Income (Y) or GDP
C + Ig + G + (X-M)= GDP = Aggregate Income (Y)
Four categories of GDP
Consumer spending (C), Investment spending (I or Ig), Government spending (G), and Net exports (X-M)
Net exports
Exports (x) minus imports (m). Many times US exports less than they import, causing x to be negative
Final goods
Good actually sold to consumers instead of producers
Gross domestic product (GDP)
The total dollar value of all final goods and services produced in a nation during one year
Indicators of standard of living
- Rate of inflation - Rate of population growth - Change in distribution of income - Change in leisure time enjoyed by typical workers - Change in impact of externalities not included in GDP - Change in product quality
National income
Includes all money payments (wages, profit interest, rent) earned by households as a result of their interaction in the resource market. When added together, these factor payments should be equivalent to GDP (with addition of depreciation and indirect business taxes). Transfer payments from government are not counted.
Consumer spending
Largest part of GDP, includes new cars, food, haircuts, gas and clothing
Business inventories
Monthly economic report that shows dollar amount in inventory held by retailers, manufacturers, and wholesalers
Net domestic product (NDP)
NDP is calculated by subtracting consumption of fixed capital (depreciation) from GDP. If you didn't account for depreciation, the economy's output would be overstated.
Public transfer payments
Payments from government for which no good or service is received. E.g. welfare
Real GDP per capita
RGDP divided by amount of people in a nation, used to compare wealth
Imports
Something we buy from another country
Exports
Something we sell to another country
Gross national product (GNP)
The final value of all goods and services produced by a nation's citizens (no matter where they live) during some time period, usually one year
Personal income
The money households earn before personal income taxes are subtracted. Social security taxes not counted.