MacroEconomics - ch.21
depreciation equals GDP (income approach) minus the sum of wages, interest, rent and profit, and indirect taxes less subsidies
Dp = GDP(income approach) - SoW - interest,rent,profit- indirect taxes less subsidies
Net domestic product at factor cost equals the sum of wages and interest, rent and profit
NDP (factor cost) = (Sum of wages + Interest, rent, and profit)
Net factor product at factor cost equals GDP (income approach) minus (indirect taxes less subsidies plus depreciation).
Net factor product at factor cost = GDP (income approach) - (direct taxes less subsidies + depreciation)
GDP is a poor measure of economic well-being because it _______.
includes only production that is traded in markets
consumption expenditure
the expenditure by households on consumption goods and services (non durable /durable goods & services)
National income equals gross national product ______.
minus depreciation minus the statistical discrepancy
GDP measures what?
the value of production during given time period
Depreciation is the _____ in the value of _____ that results from its use and from obsolescence.
decrease; capital
The business cycle is a _____ but _____ up-and-down movement of total _____ and other measures of economic activity.
periodic; irregular; production
Gross national product equals gross domestic product plus net factor income received from or paid to other countries
(GDP + Nfi)
Nominal GDP in 2015 equals the sum of the quantities produced in ______ multiplied by the prices that prevailed in ______.
2015;2015
Remember that 2015 is the base year. Real GDP in 2016 equals the sum of the quantities produced in ______ multiplied by the prices that prevailed in ______.
2016;2015
Nominal GDP in 2016 equals the sum of the quantities produced in ______ multiplied by the prices that prevailed in ______.
2016;2016
Chained-dollar real GDP is the measure of real GDP calculated by the _____.
Bureau of Economic Analysis
quarterly GDP
GDP measured after a quarter of a year
annual GDP
GDP measured yearly
Exports of goods and services
Items that firms in the United States produce and sell to the rest of the world.
Imports of goods and services
Items that households, firms, and governments in the United States buy from the rest of the world.
recession
Recession is a period during which real GDP decreases for at least two successive quarters; or defined by the NBER as "a period of significant decline in total output, income, employment, and trade, usually lasting from six months to a year, and marked by contractions in many sectors of the economy."
Statistical discrepancy is calculated as the GDP expenditure total minus the GDP income total
SD = GDP (expenditure) - GDP (income total)
Government expenditure on goods and services
The expenditure by all levels of government on goods and services
Net exports of goods and services
The value of exports of goods and services minus the value of imports of goods and services.
An economy produces only fun and food. The table shows the prices and the quantities of fun and food produced in 2016 and 2017. The base year is 2016. Potential GDP in 2016 is $270 and it grew by 1 percent in 2017. The economy is in ______ because ______ between 2016 and 2017.
an expansion; real GDP is increasing
GDP at income approach to calculating GDP is equal to $17.8 - (-$ 0.3), which is $18.1 trillion.
calculate expenditure approach and then subtract the statistical discrepancy
what happens to unsold inventory
it counts as investment
percentage increase In the base year, real GDP equals nominal GDP, so real GDP in 2016 equals (41×$55) + (62×$22), which is $329. Real GDP in 2017 equals the quantity produced in 2017 multiplied by the prices in 2016, so real GDP in 2017 equals (42×$55) + (66×$22), which is $342. The percentage increase in real GDP equals [($342−$329)÷$329]times×100, which is 4.0 percent.
percentage increase [(real of second year - real of base year) ÷ real of base year] × 100
Investment
the purchase of new capital goods
In the base year, real GDP equals nominal GDP.
true
Real GDP is the value of the _____ goods and services produced in a given year expressed in terms of the prices in _____ year.
final; a base;
Nominal GDP is the value of the _____ goods and services produced in a given year expressed in terms of the prices of _____ year.
final; that same
Potential GDP is the value of real GDP when all the economy's factors of production - _____, _____, _____, and _____ - are fully _____.
labor; capital; land; entrepreneurial ability; employed
