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Important Terms

Accounting Profit:  The profit made from the total revenue received from the sale of the goods less the (explicit) costs of producing these goods. It is calculated as total revenue minus explicit costs.

Black Market: A market where regulations and laws are not practiced when there are exchanges of goods and services.

Durable Goods: These are goods that last for a while.

Economic Profit:  This is calculated not only with the explicit costs of production, but with the implicit costs as well. Economic profit is calculated as revenue minus implicit and explicit costs.

Final goods and services: Products purchased for final consumption. This does not include goods to be used in further production process.

Imputed Rent: This is the implicit rental value of owner-occupied houses.

Indirect Business Taxes: These are non-income taxes, which mean all taxes except personal income and corporate taxes. These taxes do represent a business expense and are included in the GDP.

Intermediate Goods:  Products that are used in the production of some other product.

Nondurable Goods: These are goods that last only a short period of time.

Services: This includes the work individuals and firms do for consumers.

Trade Balance:  In this case imports are equal to exports.

Trade Deficit:  In this case imports exceed exports resulting in a negative balance of trade.

Trade Surplus:  In this case exports exceed imports resulting in a positive balance of trade.

Value Added: The difference between the value of a firm's final output and the value of intermediate inputs it has utilized.

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