Principles of Macroeconomics, Chapter 6

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national income and product accounts
data collected and published by the government describing the various components of national income and output
gross domestic product (GDP)
the total market value of all final goods and services produced within a given period by factors of production located within a country’s physical boundaries
final goods
goods and services produced for final use
intermediate goods
goods produced by one firm for use in production by another
value added
the difference between the value of goods as they leave a stage of production and their value upon entering that stage
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 production location
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) recieved by all factors of production in producing final goods and services
GDP = C + I + G + (EX – IM)
GDP, expenditure approach formula
personal consumption expenditures (C)
expenditures by consumers on goods and services
durable goods
goods that can last a relatively long time
nondurable goods
goods that are used up fairly quickly
things we buy that do not involve the production of physical objects
gross private domestic investment (I)
total investment in capital; new housing, plants, equipment, and inventory by the private 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 = produced now, sold later)
the amount by which an asset’s value falls in a given period
gross investment
total value of all newly produced capital goods produced in a given period
net investment
gross investment minus 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 and imports; 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 paid to households by firms and by the government
proprietors’ income
the income of unincorporated businesses
rental income
the income recieved by property owners in the form of rent
corporate profits
the income of corporations
net interest
the interest paid by business
indirect taxes minus subsidies
taxes such as sales taxes, customs duties, and license fees minus subsidies that the government pays for which it recieves no goods or services in return
net business transfer payments
net transfer payments by businesses to others
surplus of government enterprises
income of government enterprises
net national product (NNP)
GNP minus depreciation
statistical discrepancy
data measurement error
personal income
the total income of households
disposable personal income (after-tax income)
personal income minus personal income taxes
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
current dollars
the current prices we pay for goods and services
nominal GDP
GDP 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 weights from a given base year
underground 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