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# Ch056 - CHAPTER CHECKLIST

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Cobbe ECO2013F03 Chapter 5 Page 1 of 7 < When you have completed your study of this chapter, you will be able to C H A P T E R C H E C K L I S T Define GDP and explain why the value of production, income, and expenditure are the same for an economy. 1 Describe how economic statisticians measure GDP in the United States. Distinguish between nominal GDP and real GDP and define the GDP deflator. 2 3 Explain and describe some of the limitations of real GDP as a measure of the standard of living. 4 5.1 GDP, INCOME, AND EXPENDITURE < GDP Defined Gross domestic product or GDP The market value of all the final goods and services produced within a country in a given time period. [ BUT with some ‘conventions’ – arbitrary rules to give consistency to the estimates.] Value Produced Use market prices to value production. 5.1 GDP, INCOME, AND EXPENDITURE What Produced Final good or service A good or service that is produced for its final user and not used up producing another good or service. Intermediate good or service A good or service that is produced by one firm, bought by another firm, and used up producing another good or service. GDP includes items that are traded in markets, and certain specific other items [e.g. government production, some non- profit organization production], usually valued at cost. 5.1 GDP, INCOME, AND EXPENDITURE Where Produced Within a country When Produced During a given time period – generally a year, or a ‘quarter’ [three months] reported at an annual rate. Final Goods : The four categories are C, Consumption, I, Investment, G, Government Purchases, and (X – M), Net Exports. Who buys it determines what it is among C, I, G, and (X – M) 5.1 GDP, INCOME, AND EXPENDITURE < Circular Flows in the U.S. Economy Consumption expenditure The expenditure by households on consumption goods and services. Investment The purchase of new capital goods (tools, instruments, machines, buildings, and other constructions) and additions to inventories.

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Cobbe ECO2013F03 Chapter 5 Page 2 of 7 5.1 GDP, INCOME, AND EXPENDITURE Government purchases of goods and services The expenditure by all levels of government on goods and services; much of this is the employment cost of government workers (and the military). Net exports of goods and services The value of exports of goods and services minus the value of imports of goods and services. 5.1 GDP, INCOME, AND EXPENDITURE Exports of goods and services Items that firms in in the United States sell to the rest of the world. Imports of goods and services Items that households, firms, and governments in the United States buy from the rest of the world. 5.1 GDP, INCOME, AND EXPENDITURE Total expenditure is the total amount received by producers of final goods and services. Consumption expenditure:
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Ch056 - CHAPTER CHECKLIST

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