National account aggregates

Gross

Before depreciation. If depreciation is included, it is net

Domestic

Produced within the geographical boundaries of the home country

Market prices

Takes into account the effect of taxes and subsidies

GDP

Total value of final goods and services produced within the borders of a country in a specific period, usually within a year

Primary sector

Industries involved in extracting natural resources

Secondary Sector

Made up of industries that process raw materials received from Primary sector

Tertiary sector

Service sector involves the selling of services

Factor Cost

The amount received by various FOP’s

True value of income earned

Basic Prices

Initial prices in production of final goods and services, has taxes and subsidies on PRODUCTION

Market Prices

Prices payed by the consumer

Has Taxes on production and products

Real GDP

Calculates economic growth

GDP at constant prices

Nominal GDP

Has inflation

Calculates economic development (GDP at current prices)

Gross National Product

Value of all final goods and services produced by the PERMANENT residents/citizens of a country, usually within a year

The Multiplier effect

Measures the effect on national income of a change in a component of aggregate demand

MPC

Marginal propensity to consume

Percentage of increase in income that is spent (fraction of additional income)

Two sector model

Closed economy

Y=C+I

mps+mpc=1

Three Sector Model

2 sector model and government sector

Y=C+I+G

MPT (marginal propensity to tax) is included as leakage

mps+mpc+mpt=1

Four Sector Model

3 sector model and foreign sector

mps+mpt+mpm+mpc=1

mps+mpt+mpm=mpw

mpm

Marginal propensity to import

mpw

Marginal propensity to withdraw