Macro Economics Chapter 05 Key Words Flashcards
circular flow model
A diagram showing the flow of products from businesses to households and the flow of resources from households to businesses. In exchange for these resources, money payments flow between businesses and households.
disposable personal income (DI)
The amount of income that households actually have to spend or save after payment of personal taxes.
expenditure approach
The national income accounting method that measures GDP by adding all the spending for final goods during a period of time.
final goods
Finished goods and services produced for the ultimate user.
flow
A flow is a rate of change in a quantity during a given time period, such as dollars per year. For example, income and consumption are flows that occur per week, per month, or per year.
GDP chain price index
A measure that compares changes in the prices of all final goods during a given year to the prices of those goods in a base year.
gross domestic product (GDP)
The market value of all final goods and services produced in a nation during a period of time, usually a year.
income approach
The national income accounting method that measures GDP by adding all incomes, including compensation of employees, rents, net interest, and profits.
indirect business taxes
Taxes levied as a percentage of the prices of goods sold and therefore collected as part of the firm’s revenue. Firms treat such taxes as production costs. Examples include general sales taxes, excise taxes, and customs duties.
intermediate goods
Goods and services used as inputs for the production of final goods.
national income (NI)
The total income earned by resource owners, including wages, rents, interest, and profits. NI is calculated as gross domestic product minus depreciation of the capital worn out in producing output.
nominal GDP
The value of all final goods based on the prices existing during the time period of production.
personal income (PI)
The total income received by households that is available for consumption, saving, and payment of personal taxes.
real GDP
The value of all final goods produced during a given time period based on the prices existing in a selected base year.
stock
A quantity measured at one point in time. For example, an inventory of goods or the amount of money in a checking account.
