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Lesson Flashcards: National Income Economics

Net exports

The difference between the values of exported and imported goods and services

Trade deficit

An economic measure of the balance of trade when net exports are negative (the amount by which the value of imports of goods and services exceeds the value of exports)

Gross domestic product (GDP)

A measure of the total income earned in a given period by the individuals living within a nation’s physical and political borders

Factor payments

The financial compensation received by households providing factors of production

National product

The total productive contribution of all projects in a certain economy during the fiscal year

The income approach

Representing national income by considering the total amount of income earned as compensation for the different factors of production in an economy

The output approach

Representing national income by considering the market value of goods and services produced in an economy

The expenditure approach

Representing national income by considering the value of expenses incurred in an economy

Durable goods

Goods that can stand repeated usage over a long period (three years or more), such as cars or televisions

Purchasing power

The amount of goods and services that could be bought with a given amount of money at a specified time in an economy

A firm

An organization that produces new goods and services by employing the factors of production owned by households

Nominal (money) GDP

A measure of national income based on the market value at the current year’s prices of final goods and services produced within a nation’s physical and political borders in a given time period

Transfer payments

Usually government payments made to individuals with the aim of achieving social equity and that are not made in return (or exchange) for the production of new goods and services

Nondurable goods

Goods that are either immediately consumed after one usage or have short life spans (less than three years), such as apples

Investment

Expenses incurred by a firm or the private sector to obtain fixed capital in order to add to the country’s productive capacities in the future

Real GDP

A measure of national income based on what the value of the final goods and services produced in a given time period would be during another year (the reference or base year)

Household

One or more individuals who own factors of production

Per capita income

The average income per person, which enables a comparison between different sized economies, calculated by dividing the total national income by the number of individuals in a nation

Capital gains

The increased income of an individual due to the appreciation (increased value) of their physical or financial assets

Consumer spending

The market value of final goods and services that are purchased in an economy by its consumers or by the households

Government spending

The expenditure incurred by the government to produce goods and services that benefit society as a whole, rather than individuals

Gross national income (GNI)

A measure of the total income earned by a country’s nationals within a given period (working either domestically or abroad)

Saving

The part of the national income that is not spent on the consumption of goods and services

Trade surplus

An economic measure of the balance of trade when net exports are positive (the amount by which the value of exports of goods and services exceeds the value of imports)

Value added

The difference in the market value of goods before and after each production stage

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