Untitled Flashcards Set

Gross Domestic Product (GDP)

The total market value of all final goods and services produced within a society over a certain period of time.

Intermediate Good

A good used in the production process that is not a final good or service.

Consumption Expenditures

Purchases of newly produced goods and services by households.

Private Investment Expenditures

Purchases of newly produced goods and services by firms, such as spending on new plants and equipment.

Government Purchases

Purchases of newly produced goods and services by local, state, or federal government.

Import

A good or service produced in a foreign country and purchased by someone in the home country.

Export

A good or service produced in the home country and sold in a foreign country.

Net Export

Exports minus imports.

Trade Deficit

The excess of imports over exports.

Trade Surplus

The excess of exports over imports.

Real GDP

The value of GDP computed using prices from an arbitrary base year, accounting for changes in prices.

Nominal GDP

The value of GDP computed using current period prices.

Real GDP per Capita

Value of real GDP divided by the total population of the country.

Industrially Advanced Countries (IAC's)

High income countries with market-based economies, large stocks of technologically advanced industrial capital, and a highly educated and skilled workforce.

Less Developed Countries (LDC's)

Lower income countries that are held back by poor economic institutions and undeveloped industrial capital.

Economic Development

Improvements over time in a society’s quality of life and living standards.

Economic Growth

Sustained increases over time in a society’s value of Real GDP.

GDP Growth Rate

Annual percentage change in the value of real GDP.

Catch-Up Effect

Conjecture that the growth rates of less developed countries will exceed those of developed countries over time.

Rule of 72

The observation that a variable growing at a constant rate of 'X%' will double in approximately '(72/X) periods'.

Physical Capital

Machines, buildings, factories, and other equipment used in the production process.

Human Capital

Knowledge, education, skills, experience, and work ethic of workers that determine productivity.

Technology

The application of scientific and engineering principles to production problems.

Impediments to Achieving Growth

Factors such as difficulties in developing physical capital, human resources, and poor legal and economic institutions that hinder economic growth.

Vicious-Cycle-of-Poverty Hypothesis

The conjecture that poor countries remain poor due to insufficient resources for investment in capital necessary for economic growth.

Brain Drain

The tendency of highly talented individuals from developing countries to seek education and employment in wealthy countries.

Rule-of-Law

An environment in which property rights and contracts are respected and administrated fairly and transparently.

Crony Capitalism

An environment where well-connected business people use corrupt political systems to obtain preferential treatment from the government.

Government Ownership/Control of Productive Resources

Reliance on planning instead of markets, which can decrease incentives to create value and innovate.