Economics Chapter 12 Flashcards
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Questions and Answers

What is the definition of national income accounting?

  • A method for tracking personal income.
  • A system that collects macroeconomic statistics on production, income, investment, and savings. (correct)
  • A system that collects microeconomic statistics.
  • A system for calculating consumer prices.

    • What does gross domestic product (GDP) represent?

    The dollar value of all final goods and services produced within a country's borders in a given year.

    What are intermediate goods?

    Goods used in the production of final goods.

    What defines durable goods?

    <p>Goods that last for a relatively long time.</p> Signup and view all the answers

    What are nondurable goods?

    <p>Goods that last a short period of time.</p> Signup and view all the answers

    What does nominal GDP measure?

    <p>GDP measured in current prices.</p> Signup and view all the answers

    What is real GDP?

    <p>GDP expressed in constant, or unchanging prices.</p> Signup and view all the answers

    What does gross national product (GNP) represent?

    <p>The annual income earned by U.S.-owned firms and U.S. citizens.</p> Signup and view all the answers

    What is depreciation?

    <p>The loss of the value of capital equipment that results from normal wear and tear.</p> Signup and view all the answers

    What does price level refer to?

    <p>The average of all prices in the economy.</p> Signup and view all the answers

    What is aggregate supply?

    <p>The total amount of goods and services in the economy available at all possible price levels.</p> Signup and view all the answers

    What is aggregate demand?

    <p>The amount of goods and services in the economy that will be purchased at all possible price levels.</p> Signup and view all the answers

    What defines a business cycle?

    <p>A period of macroeconomic expansion followed by a period of contraction.</p> Signup and view all the answers

    What does expansion mean in economic terms?

    <p>A period of economic growth as measured by a rise in real GDP.</p> Signup and view all the answers

    What is economic growth?

    <p>A steady, long-term increase in real GDP.</p> Signup and view all the answers

    What is a peak in the business cycle?

    <p>The height of an economic expansion, when real GDP stops rising.</p> Signup and view all the answers

    What does contraction refer to in economics?

    <p>A period of economic decline marked by falling real GDP.</p> Signup and view all the answers

    What is a trough?

    <p>The lowest point in an economic contraction, when real GDP stops falling.</p> Signup and view all the answers

    What is a recession?

    <p>A prolonged economic contraction.</p> Signup and view all the answers

    What defines a depression?

    <p>A recession that is especially long and severe.</p> Signup and view all the answers

    What is stagflation?

    <p>A decline in real GDP combined with a rise in the price level.</p> Signup and view all the answers

    What are leading indicators?

    <p>Key economic variables that economists use to predict a new phase of a business cycle.</p> Signup and view all the answers

    What is real GDP per capita?

    <p>Real GDP divided by the total population.</p> Signup and view all the answers

    What is capital deepening?

    <p>Process of increasing the amount of capital per worker.</p> Signup and view all the answers

    What does saving mean?

    <p>Income not used for consumption.</p> Signup and view all the answers

    What is the savings rate?

    <p>The proportion of disposable income that is saved.</p> Signup and view all the answers

    What is technological progress?

    <p>An increase in efficiency gained by producing more output without using more inputs.</p> Signup and view all the answers

    Study Notes

    National Income Accounting

    • Collects macroeconomic statistics on production, income, investment, and savings.

    Gross Domestic Product (GDP)

    • Represents the dollar value of all final goods and services produced within a country's borders within a year.

    Intermediate Goods

    • Goods utilized in the production process of final goods.

    Durable Goods

    • Products that have a relatively long lifespan.

    Nondurable Goods

    • Items that have a short lifespan.

    Nominal GDP

    • Measures GDP in current prices, reflecting the economic value at the time of measurement.

    Real GDP

    • Expresses GDP in constant prices, adjusting for inflation and providing a more accurate economic value.

    Gross National Product (GNP)

    • Total annual income earned by U.S.-owned firms and citizens, including international activities.

    Depreciation

    • Represents the decline in the value of capital equipment due to normal wear and tear over time.

    Price Level

    • The average of all prices prevailing in the economy at a given time.

    Aggregate Supply

    • The total volume of goods and services available in the economy at varying price levels.

    Aggregate Demand

    • The total quantity of goods and services that will be purchased across all price levels in the economy.

    Business Cycle

    • Describes the fluctuating periods of macroeconomic expansion followed by contraction.

    Expansion

    • Indicates a phase of economic growth characterized by an increase in real GDP.

    Economic Growth

    • A consistent, long-term increase in real GDP, reflective of an improving economy.

    Peak

    • The summit of economic expansion, marking the point when real GDP ceases to rise.

    Contraction

    • A decline in economic activity, evidenced by decreasing real GDP.

    Trough

    • The lowest point in an economic contraction, where real GDP halts its decline.

    Recession

    • A significant and prolonged period of economic contraction.

    Depression

    • A severe and extended recession, marked by notable economic downturns.

    Stagflation

    • A unique economic condition where there is a decline in real GDP alongside rising price levels.

    Leading Indicators

    • Key economic variables that help economists forecast upcoming business cycle phases.

    Real GDP per Capita

    • Calculated by dividing real GDP by the total population, reflecting average economic output per person.

    Capital Deepening

    • The process of increasing the quantity of capital available per worker, enhancing productivity.

    Saving

    • Refers to income that is not allocated for consumption.

    Savings Rate

    • The percentage of disposable income that individuals save rather than spend.

    Technological Progress

    • Represents gains in efficiency where more output is produced without increasing the amount of input used.

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    Test your knowledge with these flashcards covering key concepts in Economics Chapter 12. Learn definitions for essential terms such as national income accounting and gross domestic product (GDP). Perfect for quick revision or exam preparation.

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