Chapter 6 Review Measuring Domestic Output & National Income.

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Presentation transcript:

Chapter 6 Review Measuring Domestic Output & National Income

A nation's GDP: Market value of the total final output produced within the borders of the nation, in a year.

A nation's GDP: can be found by summing C + I g + G + X n.

What we don’t count: Non-market transactions Used items Stocks/bonds transfers

To avoid multiple counting: only counting final goods.

Final goods and services: goods and services purchased by ultimate users, rather than for resale or further processing.

intermediate good: purchase of taco shells by Taco Bell (Live Mas!)

consumption expenditures include: household spending (NOT new home sales)

Net exports are negative when: a nation's imports exceed its exports.

investment includes: business expenditures, e.g. on machinery and equipment.

largest component of total expenditures in the United States is: consumption

In the treatment of U.S. exports and imports: add exports, but subtract imports, in calculating GDP.

G stands for: government purchases.

GDP excludes: the market value of unpaid work in the home.

disposable income: income received by households MINUS personal taxes

Nominal GDP: the sum of all monetary transactions involving final goods and services that occur in the

Real GDP: GDP data that have been adjusted for changes in the price level.

Price Index = Nominal x 100 Real

If real GDP in a particular year is $80 billion and nominal GDP is $240 billion, the GDP price index for that year is: 300

If nominal GDP rises: real GDP may either rise or fall.

The price index for the base year is always: 100

Real GDP = Nominal GDPx 100 Price Index

If nominal GDP has risen faster than real GDP: the general price level has risen.

The underground economy: understates GDP.

GDP: understates economic welfare because it does not take into account increases in leisure. does NOT include environmental pollution

Would a hurricane HELP or HARM a country’s GDP? Why?

Does fixing your own car add to GDP?

Is marrying your housekeeper good for GDP?

If an American tourist spends money in Mexico, whose GDP benefits?