Krugman Macroeconomics Module 10

aggregate spending

the total spending on domestically produced final goods and services in the economy; the sum of consumer spending, investment spending, government purchases of goods and services, and exports minus imports.

bond

a loan in the form of an IOU that pays interest.

consumer spending

household spending on goods and services.

disposable income

income plus government transfers minus taxes; the total amount of household income available to spend on consumption and to save. (what you have after you pay taxes and get money from social security)

expenditure approach

an approach to calculating GDP by adding up aggregate spending on domestically produced final goods and services in the economy--the sum of consumer spending, investment spending, government purchases of goods and services, and exports minus imports.

exports

goods and services sold to other countries.

factor markets

where resources, especially capital and labor, are bought and sold.

final goods and services

goods and services sold to the final, or end, user.

financial markets

the markets (banking, stock, and bond) that channel private savings and foreign lending into investment spending, government borrowing, and foreign borrowing.

firm

an organization that produces goods and services for sale.

government borrowing

the amount of funds borrowed by the government in the financial markets.

government purchases of goods and services

total expenditures on goods and services by federal, state, and local governments.

government transfers

payments that the government makes to individuals without expecting a good or service in return. (Social Security)

gross domestic product (GDP)

the total value of all final goods and services produced in the economy during a given year.

household

a person or group of people who share income.

imports

goods and services purchased from other countries.

income approach

an approach to calculating GDP by adding up the total factor income earned by households from firms in the economy, including rent, wages, interest, and profit.

intermediate goods and services

goods and services bought from one firm by another firm to be used as inputs into the production of final goods and services.

inventories

stocks of goods and raw materials held to facilitate business operations.

investment spending

spending on new productive physical capital, such as machinery and structures, and on changes in inventories.

national income and product accounts (national accounts)

keep track of the flows of money among different sectors of the economy; calculated by the Bureau of Economic Analysis.

net exports

the difference between the value of exports and the value of imports (X 2 IM).

private savings

disposable income minus consumer spending; disposable income that is not spent on consumption but rather goes into financial markets.

product markets

where goods and services are bought and sold.

stock

a share in the ownership of a company held by a shareholder.

value added

(of a producer) the value of a producer's sales minus the value of its purchases of inputs (basically subtract the intermediate good cost)

value-added approach

an approach to calculating GDP by surveying firms and adding up their contributions to the value of final goods and services.