ECON2030 TEST 2 - Chapter 7 GDP= gross domestic...

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Chapter 7 GDP= gross domestic product (usually reported for 1 year) GDP is the dollar value of the sum of all FINAL goods and services produced in a country in one year. Underground economy is left out of GDP (drugs, product trades, prostitution, etc) as well as household production GDP doesn’t include used goods GDP only includes goods and services produced for that indicated year GDP is not adjusted for pollution or other negative effects of production, changes in crime or other social problems Final good or service- a good or service purchases by a final user. Intermediate good- a good or service that Is an input into another good or service, such as a tire on a truck Household production- goods and services people produce for themselves GDP- C+ I + G + NX C= consumption (total expenditures of households excluding new home sales) I = investment (new home sales, business expenditures on new buildings, machines and equipment) Business fixed investment- spending by firms on new factories, office buildings and machinery used to produce goods Residential investment- spending by households and firms on single family and multi unit houses Changes in business inventories- goods that have been produced but not yet sold G= government expenditures (purchases by local, state and federal governments, EXCLUDING TRANSFER PAYMENTS) (teacher salaries, highways, aircraft carriers) Transfer payments- give cash to people that give nothing in return (welfare, social security) NX= net exports NX= X – M (exports – imports) GDP does not take into account changes in technology Non durable goods- food and clothing Durable goods- automobiles and furniture Real GDP per capita(GDP per person)= value of real GDP/ country’s population Business cycle- the alternating periods of economic expansion and recession that occur in the United States and other industrial economies Expansion- total production and total employment are increasing (real GDP increasing) Recession- total production and total employment are decreasing (real GDP decreasing)
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Inflation rate- how the price level is changing over time. the percentage increase in the price level from one year to the next Gross domestic income- sum of income payments to households (wages, interest, rent and profit) The sum of wages, interest, rent and profit is total income in the economy
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ECON2030 TEST 2 - Chapter 7 GDP= gross domestic...

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