Macro flashcards unit 7

______ is a field of economics that covers topics such as the consumption and production decisions made by individuals and individual firms.

Microeconomics

Economic _________ often reduces poverty.

Growth

Gross domestic product is

The most commonly used measure of an economy's value

The definition of GDP has ______ important parts, which include _______.

4; market value, final goods, borders, time period.

Suppose, when evaluating a nation's economic activity, economists include the market value of a new truck's tires AND the market value of the truck. This is an example of ______.

double-counting

Economic growth, unemployment, and inflation all compose the field of economics known as . (Enter one word in the blank.)

Macroeconomics

The strength of using the market value of goods and services when measuring GDP is that Blank______.

It puts all goods and services into a common metric.

Job creation and improved living standards are often the result of

Rapid economic growth

Goods and services that are consumed by an end-user are called

final goods.

he most commonly used measure of an economy's value is

Gross Domestic Product

A U.S. citizen working in Mexico contributes to the GDP of Blank______.

Mexico

GDP is defined by what?

Country boundaries, final goods, market value, time period

What is a solution to double-counting

National income accounting

What is national income accounting

something used by governments to track overall economic activity

what does national income accounting calculate

total value of goods and services, income, money spent in a time frame, economic health

When economists express goods and services in a common unit (U.S. dollars, for example), they measure the _____ ______of those goods and services. (Enter one word in each blank)

Market value

U.S. GDP is calculated how often generally?

quarterly

Why do economists count only the market value of final goods and services in GDP?

To avoid double-counting

Which 2 methods do economists employ in order to calculate the market value

income approach and expenditure approach

What is an income approach?

method used to determine the value of a business or real estate based on how much money it generates.

The difference between flow and stock values

stock measures quantity at a specific point in time, flow measures a change in quantity over a period of time

what is a good analogy for stock

a photo

what is a good analogy for flow

a video

That GDP is all about the question:

was something produced here and now?

GDP = HERE, now, produced (final goods)

Here is domestic, within boarders

GDP = here, NOW, produced (final goods)

Now is a given period of time, a measure of flow

GDP = here, now, PRODUCED (FINAL GOODS)

Produced is only bran new final goods or services to avoid double counting

How to use Value Added to compute GDP, and the relationship between value added and market value of final goods.

summing the value each industry or business contributes at every stage of production

Value Added ex 1:Farmer (Stage 1): Sells wheat to the miller for (\$1.00\).

• Baker (Stage 3): Bakes and sells the bread to a final consumer for (\$2.50\).

  • Output: (\$2.50\)

  • Intermediate Inputs: (\$1.70\)

  • Value added?

.80

What is the expenditure approach?

GDP =C+I+G+NX

GDP =C+I+G+NX

What is C

Consumption

GDP =C+I+G+NX

What is I

Gross private domestic investments

GDP =C+I+G+NX

What is G

Government

GDP =C+I+G+NX

What is NX

Net Exports, meaning we subtract m, or imports

__ is the value of overall expenditure (spending)

GDP

What isn’t included in GDP

Intermediate or used goods, assets like stocks, bond, mutual funds, transfer payments, underground transactions, and non-market production like cooking your own meals.

How do you make expenditure = production gdp

add change in private inventories to the expenditure side

What reconciles the disconnect of how unsold goods show up in GDP (exp. or production)

inventory investment unsold output = positive inventory investment oversold = negative inventory investment (disinvestment)

Which GDP letters are negative investments pt 1

I because it include spending on goods from prior years

Which GDP letters are negative investments pt 2

NX or (X-M) because it includes spending on imports

What is a business fixed investment

Spending of businesses on physical and intellectual assets, does count in GDP because its equipment structures and software

What is change in inventory?

Goes into GDP and is the End of year - beginning of year inventory

why does gdp per capita not account for relative prices of goods

because it measures total economic output. it calculates the total value of goods and services produced and divides by the population

what does nominal quantity “hint:raw” mean

A value measured in current dollar value. Uninfluenced by inflation or purchasing power.