1. Chapter 15 Macroeconomics

2. Gross National Product (GNP) -the total dollar value of all final goods and services produced in the economy during one year's time. Intermediate Goods - goods and services used in the production of final goods. They are not factored in a nation's GNP. eg. the steel used in the production of a car is not factored in a nation's GNP. The car would be a factor.

3. Final Goods - are the goods that are factored in a nation's GNP. eg. We do not count the feed for a chicken but we do count the chicken.

4. The most important areas counted I. Consumer Goods a) durable and nondurable goods b) services 2.Investment Goods a) New Plants and Equipment b) Private Housing c) Inventories 3.The Government Sector a) Federal Government b) State Government c) Local Government

5. GNP = Personal Consumption Expenditures (64%) From the Consumer: 1/2 are from products sold (cars... GM, Chrysler, Ford) 1/2 are services (accountants, lawyers)

6. + Gross Private Domestic Investment (15%) -total amount spent on capital goods eg. machinery to produce goods capital investment

7. + Government Purchases or Expenses (18%) salaries, wages (president, senators, etc) defense, research (do not include transfer payments = welfare) + Net Exports (3%) goods that leave the country minus goods that enter the country

8. Inflation - The economic condition in which the average level of prices goes up (not calculated in GNP)

9. Measuring Real GNP Changing current dollars into constant dollars by counting inflation Constant Dollar GNP = Current Dollar GNP Consumer Price Index Result→ Real GNP Barter System is classified as irregular economy eg. ebay Trading

10. Production Possibilities Curve - graphic illustration of the combinations of output an economy can produce if all of its resources are utilized effectively

11. Per Capita Income = GNP Population

12. While using the data obtained from the gross national product, it is necessary to remember five necessary things to insure accuracy:

13. 1. The GNP must be corrected to reflect the real production and income figure. (use formula) 2. The data should be converted to per capita figures to make them more meaningful 3. Realize that the GNP does not include the amount of money which changes hands in the underground economy

14. 4. The GNP does not weigh the importance of the types of goods available ( luxuries or necessities) 5. The GNP Adjustment does not take into account the destruction of the Natural Resources and the environment which might result from the product of the goods and services

15. Disposable Income - income that is left after deducting tax payments Aggregate Demand - total demand of people for all goods and services produced in an economy Aggregate Supply - total supply of all goods and services in an economy

16. Checking the GNP - National Income Department of Commerce - money received by various areas in society National Income - income of the nation for the sale of goods and services Wages and Supplements salaries across the board Corporate Profits recorded profit from GM, Ford, etc.

17. Proprietors Income small businesses including partnerships Net Interest interest paid on borrowed money Profits made on investments Rent Ownership of property that generates income. Malls, Land, Apartments

18. National Income can also be found by subtracting depreciation from GNP and taxes.