Important Vocab GDP Currency v
Important Vocab
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GDP |
Currencyvalue of all final goods and services produced within a country’sborders |
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Real GDP |
Currency value of all final goods and services producedwithin a country’s borders minus the effects ofinflation |
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Inflation |
A general rise in the pricelevel of an economy |
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Consumption |
Dollar value of all goods and services purchased byhouseholds |
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Investment |
Dollar value of all goods and services purchased bybusiness for the purpose of using in their business |
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GovernmentSpending |
Dollar value of all goods and services purchased by thevarious agencies of the United States. |
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Net Exports |
Dollar value of all goods andservices produced in the United States and shipped to othercountries MINUS the value of the goods and services imported fromother countries |
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Aggregate Demand |
The amount of goods and services ALL buyers in theeconomy are willing/able to buy at all the possible pricelevels |
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Aggregate Supply |
The amount of goods and services ALL companies arewilling to produce at ALL possible price levels |
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GDP Per Capita |
Currency value of all final goods and services producedwithin a country’s borders divided by the population |
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Imports |
Goods and services produced in other countries, thenbrought to the United States in exchange for currency |
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Exports |
Goods and services produced in the United States, thensent to other countries in exchange for currency |
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Standard ofLiving |
Intangible concept that seeks to represent a country’slevel of economic prosperity. Correlates with GDP growth |
Based on the vocab &videos in Chapter 8 complete the following:
What is GDP?
- Currency value of all _____________ goods andservices produced
_________________ in a givenperiod
- Total income of a nation
- Measure of nation‟s economic well-being
- Measure of a nation‟s ______________________ from one period tothe next
- Most commonly calculated via ____________________
Four components of GDPexpenditures
- Consumption: $ amount of goods and servicespurchased by__________________
- ONLY counts goods produced in the _____________
- Examples: __________________________________
- Investment: $ amount spent by business onproductive resources and purchases of _________ by consumers! – Newmachines, new factories, research
- ____________________________ also counts
- Government: $ amount spent____________________provided goods and services
- Example: ______________________________________
- Net exports =_______________________________
Exports:________________________________________
Imports:________________________________________
GDP = _____ + _____ + _____ + _____
What’s NOT included inGDP?
- Intermediate goods ¨Financial transactions
- Used goods ¨Household production
- Underground production (black ¨ Transfer paymentsmarket)
What GDP does not tellus:
- Does not measure ___________________
- Does not measure non-monetary output or transactions (e.g.,barter, household activities) ¨ Does not take into accountdesirable externalities, such as ________________
_________________________________
- Does not measure social well-being
- Correlates to standard of living but is_______________________________
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Scenario |
Component of GDP affected: C, I, G, X-M, or NCnot counted |
Effect on GDP (increase, decrease, nochange) |
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1. A farmer purchases a new tractor. |
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2. Businesses increase their current inventories. |
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3. You spend $7 to attend a movie. |
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4. Worried about consumer confidence,Ford purchases less sheet metal for cars. |
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5. A retired man cashes his socialsecurity check from the government. |
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6. A French company purchases aone-year membership to PartyPeople.com, a U.S.-based |
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website. 7. A person pays $450 a month to rent an apartment. |
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8. Worried about a recession, peoplebegin saving more money. |
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9. The U.S. government hires 10Chinese-language experts from China to train U.S. workers. |
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10. Government closes school for the month of March. |
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Answer:
What isGDP?
- Currency value of allfinal goods and services produced in a country ina given period
- Total income of anation
- Measure of nation‟s economicwell-being
- Measure of a nation‟s economicgrowth from one period to the next
- Most commonly calculated viaexpenditure method
Four components of GDPexpenditures
Consumption: $ amount of goods and services purchased byhouseholds
- ONLY counts goods produced in thecurrent financial year
- Examples: ice creampurchase
Investment: $ amount spent by business on productiveresources and purchases of new houses by consumers! – New machines,new factories, research
- Goods inventory alsocounts
Government: $ amount spent by government provided goods andservices
- Example: social securitypayment
Net exports= Exports-imports
Exports: Goods and servicesproduced in the United States, then sent to other countries inexchange for currency
Imports: Goods and services produced in other countries,then brought to the United States in exchange forcurrency
GDP = Consmption + investment +government spending + net exports
What’s NOT included inGDP?
· Intermediate goods ¨Financial transactions
· Used goods ¨Household production
· Underground production (black ¨Transfer payments market)
What GDP does not tellus:
- Does not measureinequality.
- Does not measure non-monetaryoutput or transactions (e.g., barter, household activities) ¨ Doesnot take into account desirable externalities, such as leisure orenvironment
- Does not measure socialwell-being
- Correlates to standard of livingbut is not an actual measure of standard of living
| Scenario | component affected | change in GDP |
| A farmer purchases a new tractor | I | increase |
| Businesses increase their current inventories | I | increase |
| You spend $7 to attend a movie | C | increase |
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Worried about consumer confidence, Ford purchases less sheetmetal for cars. |
I | decrease |
| A retired man cashes his social security check from thegovernment | G | increase |
| A French company purchases a one-year membership toPartyPeople.com, a U.S.-based website | X-M | increase |
| A person pays $450 a month to rent an apartment | C | decrease |
| Worried about a recession, people begin saving more money | I | decrease |
| The U.S. government hires 10 Chinese-language experts fromChina to train U.S. workers | X-M | decrease |
| Government closes school for the month of March | G | decrease |
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