Understanding GDP and Economic Principles

Flashcards designed to help reinforce key concepts related to GDP, economic measurement, and principles discussed in the lecture.

GDP

Gross Domestic Product; a measure of a nation's production of goods and services.

Market Value

The monetary worth of all final goods and services produced within a specific time period.

Final Goods

Goods that are completed and ready for sale to the end user.

Intermediate Goods

Goods used in the production of final goods; their value is not counted separately in GDP.

Real GDP

GDP adjusted for inflation, reflecting the true value of goods and services.

Nominal GDP

GDP measured using current prices, not adjusted for inflation.

Potential Output

The maximum output an economy can produce when operating at full employment.

Output Gap

The difference between actual GDP and potential GDP.

Business Cycle

The fluctuations in economic activity that an economy experiences over time.

Recession

A significant decline in economic activity across the economy lasting more than a few months.

V Recession

A type of recession characterized by a sharp decline followed by a quick recovery.

U Recession

A recession followed by a slow recovery, taking several years to get back to normal levels.

L Recession

A type of recession that results in a prolonged period of economic stagnation.

Transfer Payments

Payments made by the government to individuals without any goods or services exchanged.

Intermediary Goods Example

Flour purchased by a bakery to produce bread; not counted in GDP until final bread products are sold.

Why Only Final Goods Count

Final goods include the value of intermediate goods, preventing double counting.

Product Origin for GDP

Only goods produced within a country count towards that country's GDP.

Economic Growth Rate

The annual percentage increase in GDP.

Inflation

The rate at which the general level of prices for goods and services is rising.

Commerce Department's Role

Responsible for collecting and reporting GDP data.

Factors Influencing GDP

Consumer spending, investment, government spending, and net exports.

High Employment Rate Impact

A high employment rate typically corresponds to maximum GDP production.

Artificial Inflation Adjustment

Adjusting nominal GDP to account for the effects of inflation to find real GDP.

Economic Indicators

Statistics that provide information about economic performance.

Goods and Services Scope

GDP includes all final goods and services produced domestically.

Annual GDP Calculation

GDP is often reported quarterly and annualized to predict economic health.

Simon Kuznets

The economist who invented the concept of GDP in the 1930s.