ECN 211 EXAM 2 Graded A+(100% Verified)

Define: GDP - Gross domestic product measures the market value of all finals goods and services produced within a country in a given period of time We measure GDP in ___________ to reflect the value society places on each good - dollars The good is included in the GDP when it is... - PRODUCED not when it's sold Any final good produced within a country counts toward GDP, even if... - the company is foreignowned A final good produced in another country by a domestic firm is.... - NOT part of the domestic country's GDP In general, we use GDP to measure our - economic well-being The components of GDP refers to... - who buys goods and services Consumers - consumer spending on goods and services is referred to as consumption (C) Businesses - Business spending on goods and services such as machinery is referred to as investement (I) Investment does NOT include - purchases of stocks and bonds (that's saving) Government - The government (G) pays private sectors firms to provide many goods and services, including highwaysSalaries paid to public employees are also part of - GDP Money paid to individuals that is not for services rendered (social security payments, unemployment benefits) are called.... - transfer payments and are NOT part of GDP Foreign Sector - Consumers and businesses in other countries buy American goods and services these are called exports (X) Goods purchased from abroad are called Imports (M) and need to be... - subtracted from GDP Define: Net exports - difference ebtween exports and imports GDP measures both... - income and expenditure 4 things not included in GDP - -Transfer Payments -Intermediate goods (Multiple Counting) -Used goods -Non-market activities Expedntiure Approach equation: - GDP= C + Ig + G + Xn 3 things gross investment includes - -All construction, including housing -All capital goods -Change in inventories 2 things government purchases include - -Include state and local government spending -Excludes public transfer payments Define: Nominal GDP - Measures the volume of goods and services produced at current pricesPrices and quantities change yearly, so we _________ compare nominal GDP figures from one year to the next - cannot Define: Real GDP - measures the volume of goods and services produced in constant prices