Ch5-12 notes

# Ch5-12 notes - CHAPTER 5 Aggregate Output – the total...

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Unformatted text preview: CHAPTER 5 Aggregate Output – the total quantity of goods and services produced in an economy in a given period Fiscal Policy – government policies concerning taxes and expenditures Cut taxes and raise spending expansionary fiscal policies Raise taxes and cut spending contractionary fiscal policies Monetary Policy – the tools used by the Federal Reserve to control the quantity of money in the economy Transfer Payments – cash payments made by the government to people who do not supply goods, services, or labor in exchange for these payments. Ex – social security, veterans’ benefits, welfare payments Aggregate Demand – the total demand for goods and services in an economy Aggregate Supply – the total supply of goods and services in an economy CHAPTER 6 GDP – the total market value of all final goods and services produced within a given PERIOD by factors of production located WITHIN a country TO CALCULATE GDP: Either take the FINAL value of the sale OR sum up the value added at each stage of production GDP – only counts NEW products – an old car that is resold is NOT counted in GDP; house that is resold is NOT counted in GDP GDP ignores all transactions in which money or goods change hands but NO NEW PRODUCTS or SERVICES are produced GNP 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 WHERE the output is produced CALCULATING GDP Expenditure Approach – add up the total amount SPENT on all goods during a given period Y = C + I + G + (X-M) Income = Consumption + Investment + Govt spending + (Exports – Imports) NO GOVT --- Y = C + I WITH GOVT – Y = C + I + G Income Approach -- add up the income received by ALL factors of production in producing final goods NATIONAL income: SUM of the 8 income categories Compensation of employees Proprietor’s income Rental income Corporate profits Net interest Indirect taxes minus subsidies Net business transfer payments Surplus of government enterprises National Income is NOT DGP National income is the income of the COUNTRY’s CITIZENS, NOT the income of residents of the country Need to subtract NOMINAL VERSUS REAL GDP Nominal GDP – Gross Domestic Product measured in current dollars Nominal GDP adjusted for price changes is called REAL GDP If we use NOMINAL GDP to track growth, we might mistake an increase in price for production growth REAL GDP – nominal GDP adjusted for price changes GDP Deflator – measure of the overall price level CHAPTER 7 Unemployment – A person 16 or OLDER who is NOT working, is available for work, and has made EFFORTS to find work in the past 4 weeks NOT in the LABOR FORCE – A person who is NOT LOOKING for work because he does not want a job OR because he has given up looking EX --- FULL TIME STUDENTS, Retired, Stay at home moms Labor Force = Employed + Unemployed Population = Labor Force + NOT in labor force Unemployment Rate: U / U + E...
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Ch5-12 notes - CHAPTER 5 Aggregate Output – the total...

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