Principles of Economics (Macroeconomics) - The Wealth of Nations

Vocabulary flashcards covering the basic measurements and identities of national income accounting from the Ec10b lecture series.

Measurement identity ($\equiv$)

A relationship between two magnitudes that are defined in a way that makes them equal by definition.

Production concept of GDP

The market value of all final goods and services produced by factors of production inside the borders of a country.

Expenditure concept of GDP

The market value of all expenditures on final goods and services produced by factors of production inside the borders of a country.

Inventory

Unsold items held by a business, which are counted as a purchase by the firm that produced them to maintain the national income accounting identity.

Flow

A variable that measures the amount produced per unit of time, such as Gross Domestic Product ($GDP$) produced in a quarter or a year.

Stock

A variable that represents a total amount measured at a specific point in time, such as wealth on a specific date.

National income accounting identity

The fundamental macroeconomic equation $Y \equiv C + I + G + (X - M)$, which sums consumption ($C$), investment ($I$), government purchases ($G$), and net exports ($X - M$) to equal total output ($Y$).