Principles of Macroeconomics chapter 6

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national income and product accounts
data collected and published by the govt describing the various components of national income and output in the economy
gross domestic product (GDP)
-total market value of all goods and services produced within a given period by factors of production located within a country
-does not include transactions where no new goods or services are produced even if money or goods change hands
final goods and services
goods and services produced for final use
intermediate goods
goods produced by one firm for use in further processing by another firm
value added
the difference between the value of goods as they leave a stage of production and the cost of the goods as they entered the 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 where the output is produced
expenditure approach
method of computing GDP that measures the total amount spent on all final goods and services during a given period


income approach
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 expenditures (C)
household spending on consumer goods
gross private domestic investment (I)
spending by firms and households (private sector) on new capital including plant, equipment, and new residential structures
government consumption and gross expenditure (G)
spending by the government on fgs
net exports (EX-IM)
net spending by the rest of the world, or exports-imports
durable goods
goods that last a relatively long time, such as cars and household appliances
nondurable goods
goods that are used up fairly quickly, like food and clothing
the things we buy that do not involve the production of physical things, such as legal and medical services and education
change in business inventories
amount by which firms inventories change during a period. inventories are goods that firms produce now but intend to sell later
the amount by which an asset’s value falls in a given period
gross investment
the total value of all newly produced capital goods (plant, equipment, housing, and inventory) produced in a given period
net investment
gross investment minus depreciation
national income
the total income earned by the factors of production owned by a nation’s citizens
compensation of employees
includes wages, salaries, and various supplements- employer contributions to social insurance and pension funds- paid to households by firms and govts
proprietor’s 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
interest paid by business
indirect taxes minus 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 by businesses to others
surplus of govt enterprises
income of govt enterprises
net national product (NNP)
GNP minus depreciation; a nation’s total product minus what is required to maintain the value of its capital stock
personal income
the total income of households
disposable personal income or after-tax income
personal income minus personal income taxes. the amount that households have to spend
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 income that is saved.
current dollars
the current prices that 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 year procedure
fixed weight procedure
a procedure that uses weights from a given base year
GDP deflator
price measure, one measure of overall price level
informal economy
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