chapter 13 - GDP and the CPI: tracking the macroeconomy

national income and product accounts

keep track of the flows of money between different sectors of the economy

government purchases of goods and services

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

consumer spending

is the household spending on goods and services

investment spending

spending on productive physical capital — such as machinery and construction of buildings — and on changed to inventories

exports

goods and services sold to other countries

imports

goods and services purchased from other countries

Final goods and services

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

intermediate goods and services

goods and services — bought from one firm by another firm — that are inputs for production of final goods and services.

GDP (gross domestic product)

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

aggregate spending

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

value added

of a producer is the value of its sales minus the value of its purchases of intermediate goods and services.

Net exports

the difference between the value of exports and the value of imports.

aggregate output

is the economy’s total quantity of output of final goods and services

Real GDP

the total value of all final goods and services produced in the economy during a given year, calculated using the prices of selected base year.

Nominal GDP

is the value of all final goods and services produced in the economy during a given year, calculated using the prices current in the year in which the output is produced.

chained dollars

is the method of calculating changes in real gdp using the average between the growth rate calculated using an early base year and the growth rate calculated using a late base year.

GDP per capita

is the gdp divided by the size of the population; it is equivalent to the average GDP per person.

aggregate price level

a measure of the overall measure of prices in the economy

market basket

a hypothetical set of consumer purchases of goods and services.

price index

measures the cost of purchasing a given market basket in a given year, where that cost is normalized so that it is equal to 100 in the selected base year.

inflation rate

% change per year in a price index — typically the consumer price index

consumer price index (CPI)

measures the cost of the market basket of a typical urban American family

Producer price index (PPI)

measures changes in the prices of goods purchased by producers

GDP deflator

for a given year is 100 times the ratio of nominal GDP to real GDP in that year.