Principle of Economics Chapter 23

Microeconomics

the study of how households and firms make decisions and how they interact in markets

Macroeconomics

the study of economy-wide phenomena, including inflation, unemployment, and economic growth

Gross Domestic Product

The sum total of the value of all the goods and services produced in a nation

Gross National Product

Total income earned by a nation's permanent residents

Net National Product

Total income of a nation's residents minus losses from depreciation

National Income

Total income earned by a nation's residents in the production of goods and services

Personal Income

Income that houses and non corporate businesses receive

Disposable Personal Income

Income that households and non corporate businesses have left after satisfying all their obligations to the government

Consumption

Spending by households, on goods and services, with the exception of purchases of new housing

Investment

Purchase of goods that will be used in the future to produce more goods and services; spending on capital equipment, inventories, and structures, including household purchases of new housing

Transfer Payment

A payment made or income received in which no goods or services are being paid for; "benefit payment"

Government Purchases

Spending on goods and services by local, state, and federal governments

Net exports

Spending on domestically produced goods by foreigners (exports) minus spending on foreign goods by domestic residents; usually negative because we consume more imports than foreign countries consume our products

Real GDP

The production of goods and services valued at constant price; uses prices from previous (base) year

Nominal GDP

the production of goods and services valued at current prices; doesn't use a base year price

GDP Deflator

a measure of the price level calculated as the ratio of nominal GDP to real GDP multiplied by 100; relationship between nominal and real GDP