MacroEconomics: Measuring input and output

nominal gross domestic product (GDP)

a measure of GDP in which the quantities produced are valued at current- year prices. Nominal GDP measures the current dollar value of production.

intermediate goods

goods that are used to build or make another product that will be subsequently sold.

final goods and services

goods and services that are sold to the end user and are not used to produce another product for subsequent sale.

consumption (C)

all expenditures made by households on goods and services, like clothing, food, electronics, and recreation, during a given time period.

gross investment (I)

the dollar value of all new capital purchased (as investments) and the expansion of inventories in an economy during a given time period.

gross investment is classified into which three categories?

business fixed investment, residential investment, and inventory investment.

government purchase (G)

all final goods purchased by federal, state, and local governments (such as tanks, police cars, fire engines, and office supplies) during a given time period, as well as all final services purchased from labor resources such as airport security personnel, police officers, and teachers.

imports (M)

goods, services, or resources produced abroad and sold domestically.

exports (X)

goods, services, or resources produced domestically and sold abroad.

net exports (NX)

the difference between exports and imports. Net Exports equals exports minus important

Net Exports formula

NX= X-M

Nominal GDP formula

Nominal GDP= C+I+G+NX

consumer durables

goods that have an average useful life of three years or more.

consumer non-durables

goods that have an average useful life of less then three years.

services

outputs, often intangible, of the direct activities of another person.

transfer payment

a payment made by the government that does not require exchange of economic activity in return. Trainer payments often take the form of payments to households.

Consumption formula

consumption= Durable goods + Non-Durable goods + services

investment

the formation of new productive capital or the expansion of inventories within an economy. It occurs either when firms buy goods and services that will enhance productivity and increase output.

business fixed investment

purchases by firms of new capital goods, such as offices, factories, tools, and machinery.

residential investment

purchases of new homes; also includes home improvements.

inventory investment

changes in inventaires from one year to the next. Inventory investment is positive if firms produce more than they sell; it is negative if they sell more than they produce.

net investment (I net)

the difference between gross investment and depreciation; represents the net change in the capital stock during a year.

depreciation

the consumption of physical capital, or the blue of capital that wears out, is used up, or becomes obsolete during a year.

Net Investment formula

Net investment = I-Depreciation

expenditures approach

an approach to calculation nominal GDP that sums four categories of expenditures on final goods and services in a country in a country in a given time period, typically ! year. The four categories of expenditure are consumption, gross investment, government purchases, and net exports.

national income

total payments to owners of resources plus profits and losses; the sum of rent, wages, interest, and profits and losses to sole proprietors and firms.

rent

payments made to land resources.

wages

payments made to labor resources.

interest

a fee for the use of money over time; the payment made to agents that lend or save money.

profits and losses

payments accruing to owners of entrepreneurial ability.

proprietor's income

profits and losses earned by individual proprietors.

corporate profits

profits and losses of corporations.

indirect business taxes

taxes paid by businesses, such as property taxes, sales, tax, excise taxes, license fees, and tariffs. These taxes are paid by firms and then are passed on to consumers as part of the price of the good or service produced. Indirect business taxes are differentiated from corporate income taxes on business profits.

net foreign factor income

the difference between payments received from resources owned in foreign countries and income earned by people in foreign countries from resources owned domestically.

national income formula

national income = rent + wages + interest + profits and losses

GDP - income approach formula

GDP+ national income + indirect business taxes + depreciation + net foreign factor income

real gross domestic product (real GDP)

a measure of the constant dollar value of all final goods and services produced in a country during a fixed period of time; sometimes called inflation-adjusted GDP. When an economy is in equilibrium, real GDP equals income Y.

inflation

a general increase in prices of goods and services.

GDP price index

a price index based on all the goods and services that are counted as gross domestic product.

home production

goods and services that are produced by a household and are not exchanged in a market.

underground economy

economic activity in which goods and services are exchanged for payment but are not counted as part of GDP. Markets that are part of the underground economy that exchange illegal goods and services or engage in illegal transactions are called black markets.