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Chapter 7 Essay

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Chapter 7 page 120-128

  I. National Accounts
      a. Net domestic product- To find the new output available for consumption and for additions to the stock of capital = GDP –   consumption of fixed capital ( depreciation)
      b. National income- total earned for contributions of land, labor, capital, and entrepreneurial talent
        i. Subtract new foreign factor income from NDP
        ii. Subtract indirect business taxes from NDP
      c. Person income-   income received whether earned or earned (SS taxes ,unemployment, education, welfare payments, disability and payments.
      d. Disposable Income- personal income less personal taxes = C consumption + S savings
      e. Circular Flow- adjustments necessary to determine each of the national income accounts
        iii. NDP is smaller than GDP b/c consumption of fixed capital flows away from GDP
        iv. National income is smaller than NDP b/c indirect business taxes and foreign factor income earned in the U.S. flow away from NDP
        v. Household-   inflow of disposable income and outflows of consumption spending and saving
        vi. Gov't- inflow of revenue in the form of taxes and disbursements in form of purchases and transfers
        vii. Business- inflows of three major sources of funds for business investment and an outflow of investment expenditures
        viii. Foreign sector- spending by foreigners adds to GDP, calculation of net exports

  II. Nominal GDP versus Real GDP
      f. GDP- measure of market or money value of final goods and services produced by the economy
Steps for Deriving Real GDP from Nominal GDP |
Method 1:1. Find nominal GDP for each year2. Compute a GDP price index3. Divide each year’s nominal GDP by that year’s price index | Method 2:1. Break down nominal GDP into physical quantities of output and prices for each year2. Determine the $ of that the physical output would have sold for if base-year prices prevailed |
      g. $/nominal...

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Chapter 7. Anti Essays. Retrieved December 14, 2018, from the World Wide Web: http://snehaedu.com/free-essays/Chapter-7-546506.html