Macroeconomics chapter 6

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Gross domestic product (GDP)
is the market value of all final goods and services produced within a country in a year.
GDP per capita
is GDP divided by population.
Gross national product (GNP)
is the market value of all final goods and services produced by a country’s permanent residents, wherever located, in a year.
Nominal variables
have not been adjusted for price change.
Real variables
have been adjusted for changes in prices by using the same set of prices in all time periods.
GDP Deflator
is a price index that can be used to measure inflation.
=(nominal GDP/real GDP)x100
recession
is a significant widespread decline in real GDP and employment..
business fluctuations (or business cycles)
are the short-run movements in real GDP around its long-term trend.
consumption
spending is private spending on final goods and services.
investment
spending is private spending on tools, plant, and equipment used to produce future output.
government purchases
are spending by all levels of government on final goods and services. Transfers are not included in government purchases.
net exports
are the value of exports minus the value of imports
( = exports – imports)
problems with GDP as a measure of output and welfare
GDP does not…
1. count the underground economy
2.count nonpriced production
3. count leisure
4.count bads: environmental costs
5.measure distribution of income
Categories: Macroeconomics