Spending, Income, and GDP

microeconomics

study of production and consumption decisions of individual producers and consumers; allocation of scarce resources among industries as well established

macroeconomics

study of the behavior of the economy as a whole; established during the Great Depression; includes the study of economic recessions and how to avoid them; long run economic growth; inflation; open economy macro

open economy

including trade/ immigration

paradox of thrift

individually responsible behavior during hard times is bad for the overall economy; profilgate behavior leads to good times for all

cash circulation

an individual with more cash on hand is richer. But if everyone has more cash on hand, that simply raises the price level, leaving the overall purchasing power the same as before

Gross Domestic Product (GDP)

the market value of final goods and services produced in a country in a given period of time; a weighed average (market value of the final goods and services is used to add up the quantities of different goods and services into one measurement)

labor force participation rate (LFPR)

the ratio of the actual labor force to the potential labor force (a/p)

potential labor force

persons 16 years of age and older who are non-institutionalized

actual labor force

includes those employed and unemployed

unemployed

people who are actively looking for a job

capital good

a long-lived good used in the production of other goods and services

value added

the market value of a firm's product or service minus the cost of inputs purchased form other firms

domestic

production that takes place within a country's border (regardless of the nationality of owner)

Gross National Product (GNP)

the total factor income that is earned by the citizens of a country (+ income earned abroad by Americans, -incomes earned by foreigners)

buyers of final goods/services

households, firms, government, foreign buyers

total expenditure

total market value of goods and services; GDP

categories of consumption expenditure

consumer durables, consumer non-durables, services

investment expenditure

spending by firms on final goods and services, primarily capital goods and housing

categories of investment expenditures

business fixed investment, residential investment, inventory investment

business fixed investment

purchase of new capital goods

residential investment

construction of new housing

inventory investment

goods that a firm produces but doesn't sell during the accounting period

government expenditure

purchases by federal, state, and local governments of final goods and services

transfer payments

payments by the government for which no current goods or services are received in exchange

exports

domestically produced goods that are sold abroad

imports

foreign made goods that are purchased by domestic buyers

labor income

wages, salaries, benefits, and incomes of the self-employed

nominal GDP

GDP valued at current prices; measures the current dollar value of production

real GDP

GDP valued at some base year prices rather than current prices; measures the actual physical volume of production

non-market economic activities

unpaid household activities, volunteer services, underground economy; not included in real GDP