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ECON 302 KEY TERMS & CONCEPTS

Chapter 2-

Basic prices- A price valuation method that includees the costs of production factors ( capital and

labour) and indirect taxes (minus subsidies) on factors of production.

Capital Consumption Allowance (depreciation)- The fall in the value of capital, because it wears out or

it is scrapped (because it is no longer useful) during the period over which economic activity ismeasured.

Chain-weighted real GDP- A method of constructing real GDP in which the relative-price weeightscontinually adjust for changing composition of production.

Closed economy- An economy isolated from the rest of the world.

Commodity price index- A weighted average of 23 commodities produced in Canada and sold in world

markets.

Consumer durables- Consumable commodities purchased by households that last for a long time.

Examples are automobiles, furniture, appliances.

Consumer nondurables and services- Consumable commodities purchased by households that last for a

short time.

Consumer price index (CPI)- A weighted average of prices of consumer goods, measured reealtive to abase year.

Corporate profits- The difference between corporate revenue and wages, interest, rent, and other costs.

Depreciation- The wearing out of capital goods overtime.

Disposable personal income- Personal income taxes.

Domestic income- Equals labour income + corporate profits + interest and investments +unincorporated business income + taxes subsidies for factors of production.

Exports- goods and services produced by residents of thee home country and sold to foreigners.

Flow variable- A variable, such as real GDP or consumption, expressed per unit of time, such as a year.

GDP in constant dollars GDP epxressed in terms of dollars from a base year. See real GDP.

GDP in curreent dollars- GDP expressed in current dollars. See nominal GDP.

Gross National Product (GNP)- The total market value of goods and services produced by the residents

of a country over a specified period of time; GNP = GDP + Net factor income from abroad.

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Gross Domestic Private Investment- Total private expenditure on capital goods, including business

spending on plant and equipment, the net change in business inventories, and residential construction.

This total contains no adjustment for depreciation.

Implicit GDP deflator- (Nominal GDP)/(Real GDP)

Imports-

Imputed rental income- Rental income on capital, such as owner-occupied housing, that is not

explicitly paid and receieved.

Indirect taxes- Sales tax or excise tax paid by businesses to fed, prov, local gov't. Includes GST and

PST.

Interest and investment income- The interest earned by individuals from business and foreign sources

the interest paid by individuals.

Inventories- Stores of commodities held by businesses either for sale or for use in production.

Labour income- The income of employees (excluding self-employed). Includes wages, salaries,benefits (including employer contributions to employment insurance, the CPP, and private pension

plans).

Market prices- A price valuation method in terms of prices actually paid by the purchaser (that include

all taxes and subsidies). (PxQ)

National income- The incom earned from all production. National income = GDP depreciation.Which equals Net domestic product.

Net domestic product (NDP)- GDP depreciation.

Net exports- Exports Imports.

Net investment income from nonresidents- The difference between incomee receipts from the rest of

the world and income payments to the rest of thee world.

Net national income (NNI)- domestic income + net investment income from nonresidents

net national product (NNP)- The difference between GNP and capital consumption allowances.

Net private domestic investment- Gross private domestic investment - depreciation

Nominal GDP- GDP expressed in current dollars.

Open economy- An economy that conducts trade with the rest of the world.

Personal consumption expenditure- Purchases of g&s by households for use in consumption

Personal income- Income received directly by persons; national income adjusted for undistributed

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corporate profits, Social Security contributions, transfer payments, and other items.

Seasonally adjusted data- Adjusted of economic variables, such as real GDP, for normal seasonal

variations

Stock variable- A variable, such as capital or money, expressed in units of goods or a dollar value.

Stock variables do not have a dimension per unit of time.

Unincorporated business income- Income of a self-employed person. Includes both capital and labour.

Value added- The increase in various stages of production.