Macroeconomics: GDP and Government Expenditures Vocabulary

Vocabulary practice cards defining key economic concepts, GDP components, and fiscal policy terminology based on lecture notes.

Government Expenditures

Total government spending, consisting of government purchases ($G$), transfer payments, and interest payments on the federal debt.

Transfer Payments

Government payments made to individuals without receiving goods or services in exchange, such as Social Security checks, FEMA checks, or stimulus checks; they are excluded from GDP.

Federal Deficit

The gap created when government expenditures exceed tax revenue, requiring the federal government to issue bonds to fund the shortfall; calculated as government expenditures minus taxes.

Gross Domestic Product (GDP)

The total market value of all final goods and services produced domestically on US soil during a specific period of time, usually one year.

Three Measures of GDP

The three equivalent methods used to calculate GDP: production, income, and expenditures.

Final Good

A finished item purchased by the end user or household that is directly counted toward GDP calculations.

Intermediate Good

A good that is used up in the production of another good or service (e.g., a tomato used in a commercial sandwich); it is excluded from direct GDP calculations to prevent double counting.

GDP by Expenditures Equation

The spending formula for GDP: $C + I + G + NX$, representing Consumption, Investment, Government purchases, and Net exports.

Consumption ($C$)

Spending by households on final goods and services; it strictly excludes spending by businesses.

Investment ($I$)

Component of expenditure GDP consisting of three items: purchases of new capital goods, changes in inventory, and purchases of new houses or apartments.

Capital Good

A man-made good owned by a business and used to produce another good or service (e.g., an Amazon delivery truck).

Net Exports ($NX$)

Total exports minus total imports; unlike consumption or government purchases, net exports can be a negative number.

Nominal GDP

Gross Domestic Product evaluated using current year quantities and current year prices.

Real GDP

Gross Domestic Product evaluated using current year quantities and base year prices (with 2017 as the base year) to eliminate the impact of inflation.

Underground Economy

Also referred to as the shadow economy, this encompasses illegal or unrecorded production that is omitted from official GDP calculations.

Market Value

The actual transaction price paid for a good or service in an exchange, rather than an estimated or appraised valuation.