Chapter 7
What is the Net national product (NNP)?
NNP = GNP - Depreciation where Depreciation is consumption of fixed capital, i.e., 10% every year.
What is the disposable income?
Disposable Income (DI) DI = PI - Direct Taxes DI is the amount households have available to spend after satisfying their tax obligations to the Government.
Define the GDP
Gross Domestic Product (GDP) is the total market value of all final goods and services produced within an economy in a given period of time (one year)
What is the GNP
Gross national product GNP is income earned by Nationals. GNP = GDP - NIA where NIA = Net Income from Abroad. NIA = Factor of payments from abroad - factor of payments to abroad.
What is the National Income (NI)
NI = NNP - Indirect Business Taxes where IBT are sales taxes. NI is how much everyone in the economy has earned.
What is the difference between nominal GDP and real GDP
Nominal GDP (NGDP) is the GDP measured at current prices. Real GDP (RGDP) is the GDP measured at constant Prices. RGDP is a better measurement of economic well-being, since it eliminates the effect of price changes.
What is the personal income?
Personal Income (PI) PI = NI - Corporate profits + transfer payments - Social insurance contributions + Dividends - Net interest + Personal interest income
What is the GDP deflator?
The GDP deflator is the ratio of Nominal GDP to Real GDP. Hence, GDP Deflator = NGDP/RGDP. GDP deflator is a measurement of the overall level of prices in the economy.
What is the Laspeyres index and the Paasche index?
The Laspeyres index has a fixed basket (CPI) and the Paasche index has a changing basket
How to calculate unemployment?
Unemployment rate = (number of unemployed/Labor Force)*100.
What is the difference between the CPI and the GDP deflator?
a) GDP Deflator measures the prices of all G&S produced in an economy. CPI measures only the prices of G&S included in a Basket. b) GDP Deflator includes only those goods produced domestically. CPI includes also imported goods.Some countries can, therefore, export inflation. c) GDP Deflator assigns changing weights since the production changes over time. CPI assigns fixed weights to G&S included in the Basket.