GDP

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Author:
yhliuaa
ID:
234223
Filename:
GDP
Updated:
2013-09-13 14:19:38
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GDP
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Description:
GDP
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  1. Inventory investment

     = production Рsales

  2. Simplification made to determine Z
    Z=C+I+G

    Price level is fixed in the short run; firms are willing to supply any amount of goods

    All firms produce only one good

    Closed economy(zero NX)

    No inventory investment
  3. Consumption function
    C=C0+C1(Yd)
  4. Disposable income

    =Y-T, T=taxes-transfer

  5. Meaning of Z

    Total demand for domestic output(GDP)

  6. Why are G&T exogenous?

    • Governments do not behave with the same regularity as consumers or firms.
    • Macroeconomists must think about the implications of alternative spending and tax decisions of the government.

  7. Demand for goods depends on

    Income, taxes, investment and government spending

  8. Difference btw GDP and total demand for goods

    Inventory investment; because it is not consumed it is not part of the demand

  9. The sales of inventory produced in previous years is not included in GDP

  10. Components in GDP, eg. C and IM may offset each other and result in no net change in GDP

  11. Marginal propensity to consume
    The effect of an additional dollar of disposable income on consumption

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