Ch 12 - The National Economic Accounts

GDP

is the primary statistic for measuring the overall performance of the economy.

BEA

gathers the change in inventories in with business spending on plant and equipment and residential construction to get what it calls investment.

Consumption expenditure

is the total amount of money spent on goods and services which are used to satisfy needs and wants.

Analysts

are people who are responsible for collecting information about the production & price of certain goods, which is how GDP is calculated.

raw materials

are which will be incorporated and sold in the final product by a firm.

Imports

should not be included in the GDP calculation as they are goods from outside the country’s borders.

National Economic Accounts

group of statistics which measure various aspects of economy’s performance.

Underground economy

are economic transactions which are illegal as the goods and services are unlawful.

GDP

In order to make ________ calculation easier on the government, the BEA categorises all goods and services which were sold to households and refers to them as consumption expenditure.

Imports

are subtracted from exports to get "net exports.

GDP

does not account for factors such as the differences between countries and traffic and congestion, even though these two countries could have the exact same GDP.

GDP

is also calculated per capita, meaning that it is divided by the countrys capital to get the final answer.

National Economic Accounts

group of statistics which measure various aspects of economys performance

Gross National Product (GNP)

dollar value of production within a countrys citizens

Consumption expenditure

is the total amount of money spent on goods and services which are used to satisfy needs and wants

Disposable Personal Income (DPI)

the income of households after taxes have been paid

Government Expenditures

Is the total of government spending which includes all government consumption, transfer payments, and investments.

Investment Expenditures

This is referred to as the spending on purchases such as land, machinery, production inputs, or infrastructure.

Exports and Imports

This is the cost of goods and services which are produced in a country and sold abroad (exports). However, some expenditure made by households or governments and such could be on goods and services from abroad (imports).

Formula for GDP

GDP = C + I + G + X

The Income Approach

Is the method of converting income stream into an indicator of market value.

The Value Added Approach

It is similar to the income approach, however, instead of calculating who earned income during the production process, the value added approach considers how much the final retail price was added by each producer or industry

Real GDP

is given in constant prices and refers to the volume value of GDP. The year where prices to calculate GDP are taken from is called a base year.

The Underground economy

are economic transactions which are illegal as the goods and services are unlawful.

GDP per Capita

GDP/Population