Principles of Macroeconomics, Chapter 6

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national income and product accounts

data collected and published by the government describing the various components of national income and output

gross domestic product (GDP)

the total market value of all final goods and services produced within a given period by factors of production located within a country's physical boundaries

final goods

goods and services produced for final use

intermediate goods

goods produced by one firm for use in production by another

value added

the difference between the value of goods as they leave a stage of production and their value upon entering that stage

gross national product (GNP)

the total market value of all final goods and services produced within a given period by factors of production owned by a country's citizens, regardless of production location

expenditure approach

a method of computing GDP that measures the total amount spent on all final goods and services during a given period

income approach

a method of computing GDP that measures the income (wages, rents, interest, and profits) recieved by all factors of production in producing final goods and services

GDP = C + I + G + (EX - IM)

GDP, expenditure approach formula

personal consumption expenditures (C)

expenditures by consumers on goods and services

durable goods

goods that can last a relatively long time

nondurable goods

goods that are used up fairly quickly

services

things we buy that do not involve the production of physical objects

gross private domestic investment (I)

total investment in capital; new housing, plants, equipment, and inventory by the private sector

nonresidential investment

expenditures by firms for machines, tools, plants, and so on

residential investment

expenditures by households and firms on new houses and apartment buildings

change in business inventories

the amount by which firms' inventories change during a period (inventories = produced now, sold later)

depreciation

the amount by which an asset's value falls in a given period

gross investment

total value of all newly produced capital goods produced in a given period

net investment

gross investment minus depreciation

government consumption and gross investment (G)

expenditures by federal, state, and local governments for final goods and services

net exports (EX - IM)

the difference between exports and imports; can be positive or negative

national income

the total income earned by the factors of production owned by a country's citizens

compensation of employees

includes wages, salaries, and various supplements paid to households by firms and by the government

proprietors' income

the income of unincorporated businesses

rental income

the income recieved by property owners in the form of rent

corporate profits

the income of corporations

net interest

the interest paid by business

indirect taxes minus subsidies

taxes such as sales taxes, customs duties, and license fees minus subsidies that the government pays for which it recieves no goods or services in return

net business transfer payments

net transfer payments by businesses to others

surplus of government enterprises

income of government enterprises

net national product (NNP)

GNP minus depreciation

statistical discrepancy

data measurement error

personal income

the total income of households

disposable personal income (after-tax income)

personal income minus personal income taxes

personal saving

the amount of disposable income that is left after total personal spending in a given period

personal saving rate

the percentage of disposable personal income that is saved

current dollars

the current prices we pay for goods and services

nominal GDP

GDP measured in current dollars

weight

the importance attached to an item within a group of items

base year

the year chosen for the weights in a fixed-weight procedure

fixed-weight procedure

a procedure that uses weights from a given base year

underground economy

the part of the economy in which transactions take place and in which income is generated that is unreported and therefore not counted in GDP

gross national income (GNI)

GNP converted into dollars using an average of currency exchange rates over several years adjusted for rates of inflation

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