Chapter 6 example #43927

The combined value of all final goods and services produced within a country in a year.

A country's Gross Domestic Product divided by its population.

Final

False

True

tells us how rapidly the country's production is growing or falling over time

(GDP 2 - GDP 1) divided by GDP 1. Multiplied by 100

Price Changes

Real gdp

is one that corrects for inflation

A price index that can be used to measure inflation -The ratio of nominal to real GDP multiplied by 100

A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale—retail sales.

the fluctuations of real GDP around its long-term trend, or "normal" growth rate

Y= Nominal GDP C=Consumption I=Investment G=Government Purchases NX= Exports minus Imports

Y= C+I+G+NX

private spending on final goods and services

private spending on tools, plant, and equipment that are used to produce future output.

Experts- Imports=Net Exports

1) National Spending Identity 2) Factor Income Approach

Y= Employee compensation + Rent + Interest + Profit

Every dollar spent is a dollar of income received so if we are careful in our accounting, we can measure GDP by summing up all the spending on final goods and services or by summing up everyone's income.

You dont always know the value of some goods or services -Ex. Underground economy -Ex. Clean Air -nonpriced production -the value of leisure It doesn't measure the distribution of income

the market value of all final goods and services produced by a country's permanent residents, wherever located, in a year

variables that have not been adjusted for change in prices

a significant, widespread decline in real income and employment

real GDP Growth rate per capita plus population growth

measures a country's production of final goods and services at current market prices, whereas real GDP measures a country's production of final goods and services at the same prices in all years.