1. aggregate price level is ?
    The average price of goods and services in an economy is called the aggregate price level, or, more simply, the price leve
  2. budget deficit is ?
    The excess of government expenditures over tax revenues for a particulartime period, typically a year
  3. budget surplus arises when?
    tax revenues exceed government expenditures
  4. The most commonly reported measure of aggregate output is?
    the gross domesticproduct (GDP)
  5. gross domesticproduct (GDP) is ?
    is the market value of all final goods and services produced in acountry during the course of the year.
  6. GDP measure excludes two sets of items they are what?
    1. Purchases of goods that have been produced in the past, whether a Rembrandt painting or a house built 20 years ago,are not counted as part of GDP, nor are purchases of stocks or bonds. None of these enter into GDP because they are not goods and services produced during the courseof the year.

    2. Intermediate goods, which are used up in producing final goods and services,such as the sugar in a candy bar or the energy used to produce steel, are also notcounted separately as part of GDP. Because the value of the final goods alreadyincludes the value of the intermediate goods, to count them separately would be tocount them twice.
  7. Nominal GDP is ?
  8. The total value of final goods and services is calculated using current prices; the resulting GDP measure is referred to as nominal GDP.Therefore, nominal GDP will include all of the changes in market prices that have occurred during the current year due to inflation or deflation.
  9. Real GDP is ?
    • Using a arbitrary base year, currently 1996. GDP measured with constant prices is referred to as real GDP, the word real indicating that values are measured in terms of fixed prices. Real variables thus measure the quantities of goods and services and do not change because prices have changed, but rather only if actual quantities have changed.
    • So if you sell a Truck in 1996 for $10,000.00 then if GDP sells a truck in 1998 it is sold for $10,000.00
  10. What is more useful to economist Real or Nominal GDP?
    • Because real variables measure quantities in terms of real goods and services, they
    • are typically of more interest than nominal variables. In this text, discussion of aggregate
    • output or aggregate income always refers to real measures (such as real GDP).
  11. GDP deflator equation is used to show what?
    The GDP deflator equation indicates that, on average, prices have risen or fallen from a specific time.
  12. What is the DGP deflator equation?
    GDP deflator = Nominal GDP / Real GDP x 100
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