Standard of Living
the level of consumption of goods and services that people enjoy, on average, measured by average income per person.
Gross Domestic Product
The market value of all the final goods and services produced within a country in a given time period
Final good or service
a good or service that is produced for its final user and not as a component of another good or service
Intermediate good or service
a good or service that is used as a component of a final good or service
What counts in a country's GDP
only products that are produced within that country
GDP measures value of production during what time periods?
quarter of a year or a year
4 groups that buy the final goods and services produced
households, firms, governments, and the rest of the world
4 Types of Expenditure
consumption expenditure
investment
government expenditure on goods and services
net exports of goods and services
Consumption Expenditure
the expenditure by households on consumption goods and services
Investment
The purchase of new capital goods and additions to inventory
Investment does not include
stocks or bonds
Government expenditure on goods and services
the expenditure by all levels of government on goods and services
Net exports of goods and services
the value of exports of goods and services minus the value of imports of goods and services
exports of goods and services
items that firms in the united states produce and sell to the rest of the world
Total Expenditure
C+I+G+NX
consumption, investment, gov. expenditure on goods and services, and net exports of goods and services
Net Taxes
taxes paid minus cash benefits received from governments
Saving
the amount of income that is not paid in net taxes or spent on consumption goods and service
Total Incom
Y= C+S+NT
The value of production =
income equals expenditure
GDP is found using what two approaches
Expenditure
Income
Expenditure Approach
adds Consumption, expenditure, investment, government expenditure, and net exports
expenditures that are not in GDP
Used goods
Financial Assests
Income Approach
Sums the incomes firms pay
Two categories for income approach
wages
interest, rent, and profit
Wages are called
compensation of employees
interest, rent, and profit are called
operating surplus
Net domestic product at factor cost
the sum of wages, interest, rent, and profit
Gross National Product
THe market value of all the final goods and services produced anywhere in the world are given a time period by the factors of production supplied by the residents of the country
Disposable personal income
income received by households minus personal income taxes paid
Real GDP
the value of the final goods and services produced in a given year expressed in terms of the prices in a base year
Nominal GDP
the value of final goods and services produced in a given year expressed in terms of the prices of that same year
Two main purposes we use real GDP
To compare the standard of living over time
To compare the standard of living among countries
RGDP per person
Real GDP divided by population