Circular Flow and Gross Domestic Product

These flashcards cover key vocabulary and concepts related to Circular Flow and Gross Domestic Product as discussed in the notes.

Gross Domestic Product (GDP)

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

National Income and Product Accounts

A set of numbers calculated by the Bureau of Economic Analysis to track the spending of consumers, business investments, and government purchases.

Circular-Flow Diagram

A model that shows the flow of money, goods, services, and resources in an economy.

Household

A person or group of people who share income.

Firm

An organization that produces goods and services for sale.

Consumer Spending

Household spending on goods and services.

Intermediate Goods and Services

Goods/services purchased from one firm by another firm to be used as inputs in the production of final goods/services.

Final Goods and Services

Goods/services sold to the final or end user.

Expenditure Approach

A method of calculating GDP by adding up all spending on domestically produced final goods and services.

Value-Added Approach

A method of calculating GDP that adds up the contributions of all firms to the value of final goods and services.

Income Approach

A method of calculating GDP that adds up total factor income earned by households from firms.

Net Exports

The value of exports minus the value of imports.

Disposable Income (YD)

Income plus transfers minus taxes.

GDP deflator

A measure of price levels that adjusts nominal GDP for inflation.

Real GDP

The total value of all final goods and services produced, calculated as if prices remained constant at the level of some base year.

Nominal GDP

The total value of all final goods and services produced in the economy during a given year with the prices current in that year.

GDP Per Capita

GDP divided by the population, which indicates the average economic output per person.

Inflation

A general increase in prices and a fall in the purchasing value of money.

Tariff

A tax or duty imposed on a particular class of imports or exports.

Investment Spending

Spending on new productive physical capital, such as machinery and buildings.