chapter 7

National Accounts

National income and product accounts calculated by countries to measure economic activity.

Gross Domestic Product (GDP)

Total value of all final goods and services produced in an economy during a time period.

Final Goods and Services

Goods/services sold to the final/end user.

Intermediate Goods and Services

Goods/services that are inputs for the production of final goods.

Expenditure Approach

Calculating GDP by adding up spending on all domestically produced final goods/services.

Real GDP

A measure of aggregate output that accounts for inflation by holding prices constant.

Nominal GDP

GDP at current prices with no adjustments for inflation.

Consumer Price Index (CPI)

A measure showing how the cost of purchases by a typical family changes over time.

Price Index

A normalized measure of overall price level, with the base year set to 100.

Value Added Approach

Calculating GDP by summing the value added at each step of production, excluding intermediate goods.

Income Approach

Calculating GDP by adding up total factor income earned by households from firms.

Inflation Rate

Annual percent change in an official price index, indicating the rate of inflation.

Market Basket

A hypothetical consumption bundle used to measure changes in overall price level.

Net Exports

Exports minus imports, affecting the flow of funds in an economy.

Chain Linking

A method used to measure changes in real GDP by averaging growth rates over different periods.

Aggregate Price Level

A single number representing the overall level of prices in an economy.

Production Possibility Frontier (PPF)

A curve that illustrates the maximum feasible amounts of two goods that a business can produce.

Producer Price Index (PPI)

Measures changes in prices of goods purchased by producers, reflecting inflation/deflation quicker than CPI.