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.