macro chapter 2

gross domestic product (GDP)

the value of the output of all final goods and services produced within a country in a given year

trade balance

the gap between exports and imports

trade surplus

when a country’s exports are larger that its imports

trade deficit

when a country’s imports exceed exports

GDP formula

consumption + investment + government + trade balance

GDP = C + I + G + (X - M)

what is counted in GDP

consumption, business investment, gov spending, net exports

what is not counted in GDP

intermediate goods, transfer payments and non-market activities, illegal goods, used goods

production

durable goods, non-durable goods, services, structures, change in inventories

intermediate goods

output provided to other businesses at an intermediate stage of productions, not for final users. excluded from GDP

double counting

output that is counted more than once as it travels through the stage of production

final goods and services

output used directly for consumption, investment, government, and trade purposes

GDP per capita

GDP divided by the population

standard of living

all elements that affect people’s happiness and well-being, whether they are bought and sold in the market or not

houses and GDP

newly built houses do not count until they are sold, if sold again it is counted as used and will not count in GDP