Principles of Macroeconomics Chapter 6

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National Income and Product Accounts (NIPA)
Data collected and published by the government describing the various components of national income and output in the economy
Gross Domestic Product (GDP)
The total market value of all final goods and services produced with a given period by factors of production located within a country
Final Goods and Services
Goods and services produced for final use
Intermediate Goods
Goods that are produced by one firm for use in further processing by another firm
Value Added
Value of Sales – Value of Intermediate Inputs
Gross National Product (GNP)
The total market value of all final goods and services produced within a given period by factors of production owned by a country’s citizens, regardless of where the output is produced
Expenditure Approach
A method of computing GDP that measures the total amount spent on all final goods and services during a given period
Income Approach
A method of computing GDP that measures the income- wages, rents, interest, and profits- received by all factors of production in producing final goods and services
Personal Consumption Expenditure
Expenditures by consumers on goods and services
Durable Goods
Goods that last a relatively long time, such as cars and household appliances
Nondurable Goods
Goods that are used up fairly quickly, such as good and clothing
The things we buy that do not involve the production of physical things, such as legal and medical ______ and education
Gross Private Domestic Investment
Total investment in capital- that is, the purchase of new housing, plants, equipment, and inventory by the private (or nongovernment) sector
Nonresidential Investment
Expenditures by firms for machines, tools, plants, and so on
Residential Investment
Expenditures by households and firms on new houses and apartment buildings
Change in Business Inventories
The amount by which firms’ inventories change during a period. Inventories are the goods that firms produce now but intend to sell later
The amount an asset’s value falls in a given period
Gross Investment
The total value of all newly produced capital goods (plants, equipment, housing, and inventory) produced in a given period
Net Investment
Gross Investment – Depreciation
Government Consumption and Gross Investment (G)
Expenditures by federal, state, and local governments for final goods and services
Net Exports (Ex – Im)
The difference between exports (sales to foreigners of U.S. – produced goods and services) and imports (U.S. purchases of goods and services from abroad). The figure can be positive or negative
National Income
The total income earned by the factors of production owned by a country’s citizens
Compensation of Employees
Includes wages, salaries, and various supplements- employer contributions to social insurance and pension funds, for example- paid to households by firms and by the government
Proprietors’ Income
The income of unincorporated businesses
Rental Income
The income received by property owners in the form of rent
Corporate Profits
The income of corporations
Net Interest
The interest paid by business
Indirect Taxes – Subsidies
Taxes such as sales taxes, customs duties, and license fees less subsidies that the government pays for which it receives no goods or services in return
Net Business Transfer Payments
Net transfer payments of businesses to others
Surplus of Government Enterprises
Income of government enterprises
Net National Product
gross national product – depreciation; a nations product minus what is required to maintain the value of its capital stock
Statistical Discrepancy
Data measurement error
Personal Income
The total income of households
Disposable Personal Income (After-Tax Income)
Personal Income – Personal Income Taxes. The amount that households have to spend or save
Personal Saving
The amount of disposable income that is left after total personal spending in a given period
Personal Saving Rate
The percentage of disposable personal income that is saved. If the personal saving rate it low, households are spending a large amount relative to their incomes; if its is high, households are spending cautiously
Current Dollars
The current prices that we pay for goods and services
Nominal GDP
Gross Domestic Product measured in current dollars
The importance attached to an item within a group of items
Base Year
The year chosen for the weights in a fixed-weight procedure
Fixed-Weight Procedure
A procedure that uses weight from a given base year
Informal Economy
The part of the economy in which transactions take place and in which income is generated that is unreported and therefore not counted in GDP
Gross National Income (GNI)
GNP converted into dollars using an average of currency exchange rates over several years adjusted for rates of inflation
Categories: Macroeconomics