Unit II: Gross Domestic Product Gross domestic product/ GDP: total market value of all final goods and services produced within a country's borders within a given year. Gross national product/GNP: a measure of what citizens produce and whether they produce these items within a country's borders. GDP has four parts and these four parts are used to calculate it. The "C" stands for personal consumption expenditures, which are finished goods or services. 67% of the economy is spent on this section. The " I g " stands for gross private domestic investment. 17% of the economy is spent on this section. There are four things fall in this section: factory equipment maintenance new factory equipment construction of housing unsold inventories or products built in a year The "G" stands for government purchases of goods and services 20% of the economy is spent on this section. The " X n " stands for net export wh...
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Unit II: Circular Flow Models Circular flow- the flow of money, goods, services, and factors of production throughout an economy. There are three parts: Government- providers of public goods and services and demand of both private goods and services and the factors of production. Firms: organizations that produce goods and services for sale . Household- A person or a group of people who share income. Households earn the factors of productio n Product markets are where goods and services are bought and sold Factor markets and resource markets: where factors of production and resources are bought and sold
Unit II: Business Cycles Business Cycles : Fluctuations in economic activity that an economy experiences over a period of time. There are four sections: Expansion : a period of economic upturn when output and employment are rising. Peak : the highest point of real GDP. It is near or at full employment. Contraction / recession is where real GDP decreases for at least six months. T rough : the lowest point of real GDP. It has the least amount of spending and the highest unemployment. IMPORTANT INFO: One cycle is from trough to trough An average cycle is about five to seven years Recessions last about fourteen months Peaks and troughs are useless because we wont know we're in one until it's over A trough is the end of a recession If a recession loses more than 10% of real GDP it is a depression