Chapter 15 - Spending, income & GDP

Investment

________: spending by firms on final goods and services, primarily capital goods.

Gross

________ domestic product (GDP): market value of the final goods and services produced in a country during a given period.

Consumption expenditure

________ (or consumption): spending by households on goods and services such as food, clothing, and entertainment.

Market value

________: selling prices of goods and services in the open market.

Gross domestic product (GDP)

market value of the final goods and services produced in a country during a given period

Market value

selling prices of goods and services in the open market

Final goods/services

goods/services consumed by the ultimate user; because they are the end products of the production process, they are counted as part of GDP

Intermediate goods/services

goods/services used up in the production of final goods and services and therefore not counted as part of GDP

Capital good

long-lived good that is used in the production of other goods and services

Value added

for any firm, the market value of its product/service minus the cost of inputs purchased from other firms

Consumption expenditure (or consumption)

spending by households on goods and services such as food, clothing, and entertainment

Investment

spending by firms on final goods and services, primarily capital goods

Government purchases

purchases by federal, state and local governments of final goods and services; government purchases do not include transfer payments, which are payments made by the government in return for which no current goods or services are received, nor do they include interest paid on the government debt

Net exports

exports minus imports

Nominal GDP

measure of GDP in which the quantities produced are valued at current-year prices; nominal GDP measures the current dollar value of production

Real GDP

measure of GDP in which the quantities produced are valued at the prices in a base year rather than at current prices; real GDP measures the actual physical volume of production