Chapter 13
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2015-04-30 11:30
Section 1
| Question | Answer |
|---|---|
| national income accounting | measurement of the national economy's performance, dealing with the overall economy's output and income |
| gross domestic product (GDP) | total dollar value of all final goods and services produced in a nation in a single year |
| expenditures made in four economic categories | consumer sector, investment sector, government sector, net exports |
| consumer sector | goods and services bought directly by consumers |
| investment sector | business purchases of items used to produce other goods |
| government sector | goods and services bought make up the third category |
| net exports | difference between what the nation sells to other countries and what it buys from other countries |
| depreciation | loss of value because of wear and tear to durable goods and capital goods |
| net domestic product (NDP) | value of the nation's total output (GDP) minus the total value lost through depreciation on equipment |
| national income (NI) | total income earned by everyone in the economy |
| personal income (PI) | total income that individuals receive before personal taxes are paid |
| calculation for PI | add transfer payments and subtract corporate taxes, profits that businesses reinvest in business to expand, and Social Security contributions employers make from personal income |
| calculation for NI | sum of wages and salaries, income of self-employed individuals, rental income, corporate profits, and interest on savings and other investments |
| transfer payments | welfare payments and other supplementary payments that a state or the federal government makes to individuals |
| disposable personal income (DPI) | income remaining for people to spend or save after all taxes have been paid |
| calculation for DPI | subtract personal taxes from PI |
Section 2
| Question | Answer |
|---|---|
| inflation | prolonged rise in the general price level of final goods and services |
| purchasing power | the real goods and services that money can buy; determines the value of money |
| deflation | prolonged decline in the general price level of goods and services (rarely happens) |
| consumer price index (CPI) | a statistical measure of the average prices of a specified set of goods and services purchased by typical consumers in city areas |
| market basket | representative group of goods and services used to compile the CPI |
| base year | year used as a point of comparison for other years in a series of statistics |
| producer price index (PPI) | measure of the change in price over time that U.S. producers charge for their goods and services |
| GDP price deflator | price index that removes the effect of inflation from GDP so that the overall economy in one year can be compared to another year |
| real GDP | GDP that has been adjusted for inflation by applying the price deflator |
Section 3
| Question | Answer |
|---|---|
| business fluctuations | ups and downs in an economy |
| business cycle | the irregular changes in the level of total output measured by the real GDP |
| peak/boom | period of prosperity in a business cycle in which economic activity is at its highest point |
| contraction | part of the business cycle during which economic activity is slowing down |
| recession | part of the business cycle in which the nation's output (real GDP0 declines for at least six months |
| depression | major slowdown of economic activity |
| trough | lowest part of the business cycle in which the downward spiral of the economy levels off |
| expansion/recovery | part of the business cycle in which economic activity slowly increases |
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