Chapter 9- Measures of
Economic Activity
Mr. Nicholson’s class
Created by: Corey Neale
Kriss Bacon
Andrew Smardenkas
Simon Liu
9.1-Gross Domestic Product
Pages 201-210
National Income Accounts
Keeping track of the Canadian Economy is the task of _______________, a
federal agency.
-
This agency prepares the country’s___________________, which give various
measures of total income and spending in the Canadian economy.
-
This allows us to evaluate the performance of the Canadian economy and to
compare it with other nations economies.
Measuring Gross Domestic Product
Most common measure in Canada is_________________, or___.
-
GDP is the total _____________of all final goods and services produced in the
economy over a given period.
-
GDP is calculated at_____________, and the period is typically a ______.
-
Total dollar value used when calculating GDP because it _______________.
● Two Views of GDP
Canada’s GDP is calculated using two approaches, one measuring ________and
the other measuring___________.
-
The ___________approach; the GDP involves adding together all the
__________of the economy to give GDP i.e. wages and salaries, corporate
profits, interest income, proprietors income (rents), indirect taxes, depreciation,
statistical discrepancy.
-
The expenditure approach; involves adding together all the __________in the
economy to give GDP.
● The GDP Identity
GDP found using the income approach and GDP found using the expenditure
approach are the_____.
-
This relationship between the two approaches is known as the_________;
1. GDP expressed as total income __ GDP expressed as total
spending.
The GDP identity applies to the____________________.
The Income Approach:
Income Components of GDP:
~ Match to most correct statement
1. Wages and Salaries
A. It is charged on products. It is not a main
component of GDP, but it is included in the
expenditure approach.
2. Corporate Profits
B. It is a payment to share-owning households. Its
profit is declared to the government.
3. Interest Income
C. It includes interest paid on business loans and
bonds, and royalty payments.
4. Proprietors’ Incomes and Rents
D. It is the largest portion of the GDP. It includes
direct payments to workers.
5. Indirect Taxes
E. It is received by owners for supplying various
types of resources to their businesses.
6. Depreciation
F. It is the discrepancy between GDP figures.
7. Statistical Discrepancy
G. Replacing the durable assets is included in the
price as well as the GDP.
The Expenditure Approach:
-GDP found using this approach is the sum of purchases in product markets
Categories of Products:
-_____________ products are those that will not be processed further and will not
be resold. (ex. pad of paper sold at the local corner store)
-_____________ products are those that will be processed further or will be
resold. (ex. clothing sold by a wholesaler)
-
How a product is used can determine whether it is a final product or an
intermediate product (Flour can be purchased by a household or the bakery
can purchase flour that makes bread and then sells it)
-
If values of all products are included in the GDP calculations it may cause the
problem of _____________ ( the problem of adding the GDP of the same item
at different stages in its production)
-
To avoid this problem, the concept of ______________ is applied to GDP. It
is the extra worth of a product at each stage in its production; used to avoid
double-counting)
Excluded Purchases:
- The two types that is not included in the calculations using this approach
are_____________ and ______________. This is because these are not
related to current production.
● __________________
- a gift of money would not be included because it is just a shift in purchasing
power from one party to another. Also bank deposits and purchases of stocks
are not included but payments for a financial service like bank charges and
commission to a stockbroker are included.
● __________________
- purchases of second-hand goods are excluded because they have already been
counted in a previous GDP. It would lead to double-counting and give an
unrealistic and high GDP.
Included Purchases:
-
purchases included in the GDP calculations fall under four categories. They
are _______________(C), _________________(I), ________________(G),
and __________________(X-M).
-
The expenditure equation is _____________________.
● ________________(C) is the household spending on goods and services and it
makes up the largest component of GDP at 60%. Included in these purchases are
_________ goods which can be used more than once (ex. Automobiles) and
____________ goods which are a one-time use (ex. food.)
● Gross Investment (I)
- purchases of assets that are intended to produce revenue (ex. Equipment and
machines that businesses use). This section usually produces about 15 to 25%
of GDP each year.
-
_____________ are changes in money value of unsold goods and materials.
-
The construction of buildings is included in gross investment. Owneroccupied houses are also part of (I) because they can rent their homes out or
they are renting to themselves. Either way, they could be producing income,
-
_____________ the total value of productive assets that provide a flow of
revenue. This capital is subject to a decrease in value or otherwise known as
______________.
-
______________ is gross investment minus depreciation. It represents the
yearly change in the economy’s capital stock.
-
Funds for capital investment come businesses __________________ and from
______________ which are funds saved by households.
● _____________ (G)
- current government spending on goods and services and makes up about 20%
of GDP.
-
_____________ and ______________ are excluded from government
purchases because they are just a redistribution of purchasing power. They act
as tax payments in reverse.
-
Government spending is financed through taxes from households and
businesses and from borrowing.
● Net Exports (X-M)
- Exports minus imports
- Exports are foreign purchases of Canadian goods and services
- Imports are Canadian purchases of foreign goods and services
- Together, these net exports represent a small portion of GDP but when viewed
separately, each accounts for over ____% of GDP.
Section 9.2-GDP and Living Standards
Pages 211-213
Per Capita GDP:
● Per capita GDP is GDP per person and equals GDP divided by
Adjustments to Per Capita GDP:
● Inflation adjustment
○Per capita real GDP:
-Is per capita GDP expressed in constant
-Is used to compare
● Exchange-Rate adjustment
-Per capita GDPs are measured in a single
from a given year
in a given country over time
Limitations of GDP:
-Include nonmarket activities and those that take place in the
● Nonmarket Example: housework, unpaid childcare, and volunteer work
● Underground Economy: unreported transactions, the “MOB’, smuggling
-Capture improvements in
● Quality improvement Example: from faxes to email
-Composition of
● doesn’t show what is produced and purchased
-Indicate the distribution of income
● there could be a large difference in the gap between the rich and the
poor when compared to other countries with less of a gap
-Indicate how much
is enjoyed by a country’s citizens
● GDP does not show or is dependent upon the amount of leisure time
-Distinguish between activities that are and are not harmful to the
● Clean up of an oil spill would be included in GDP
● The creation of a nature preserve or national park would not
Section 9.3- Other Economic Measures
Pages 214-215
Other Economic Measures
Gross National Product:
- GNP
is
the
total
income
both_______________________.
acquired
by
Canadians
-
Note that GDP focuses on the incomes____________, GNP focuses on
the_________________.
-
To calculate GNP, two adjustments to GDP must be made;
1. Income earned from Canadian investments is ____________ from GDP
2. Income earned from ________________ by Canadians is added to GDP.
-
Foreign investment in Canada is ________ than Canadian investment in
foreign countries.
Disposable Income:
- Disposable income, or DI, which is income, after the payment of income
taxes, that households can either ______________.
Page 219-221
Adding the Human Dimension
- Mahbub ul Haq was instrumental in devising the ______________ (HDI)
published annually for various countries by the United Nations Development
Programme.
-
This index is based on _______________ adjusted for purchasing power
parity, the rate of adult literacy, the percentage of youth enrolled in school and
life expectancy at birth.
The Debate Over HDI:
- There are four issues with the HDI that its critics highlight
1. The HDI rankings for rich countries are numerically ___________,
making it difficult to use these rankings in any meaningful way.
2. Literacy figures for many countries are open to dispute.
3. Increases in per capita GDP for rich countries are ___________at higher
and higher rates, a method criticized by some observers.
4. Life expectancy statistics change very gradually and are
_________________.
Refining HDI:
- Haq was aware of these suggestions, and realized that the HDI would be
modified over time.
-
Each year, the UNDP has been including adjusted HDIs that highlight income
disparities within countries and disparities between men and women. Such
extensions are certain to continue.
Chapter 9- Measures of Economic Activity Wordsearch
I
O
D
O
O
I
P
E
C
A
H
O
T
E
C
V
Y
O
H
M
P
C
O
T
I
I
P
H
I
C
T
R
P
H
E
E
E
L
X
E
L
A
S
N
R
T
C
R
N
N
E
E
E
A
N
P
B
M
G
R
I
S
N
T
L
H
R
R
I
I
A
C
C
N
N
S
H
O
R
D
V
G
I
U
E
T
N
N
P
T
I
E
T
C
P
H
O
E
E
C
T
C
E
T
H
O
E
T
R
A
U
O
P
E
M
D
E
M
I
H
M
U
T
P
T
E
P
S
I
T
C
I
N
E
D
I
S
K
R
R
U
I
T
L
E
U
H
M
A
R
Capital Stock
Depreciation
Durable Goods
Exports
Final Product
GDP
Purchases
GNP
Net investment
Nonmarket
B
E
N
R
L
D
A
K
T
T
O
R
C
L
A
E
A
S
H
E
I
I
G
K
R
U
T
S
I
N
S
H
P
A
O
A
D
D
S
V
L
P
A
P
N
E
R
P
E
N
R
A
I
E
C
I
N
I
I
M
R
S
L
S
H
A
P
K
V
O
O
I
S
K
D
M
A
P
A
M
H
C
O
N
T
D
Y
D
S
S
P
L
E
T
S
S
T
N
A
N
G
X
R
M
O
E
P
O
C
N
A
O
T
B
R
E
S
U
S
E
O
A
T
I
I
E
O
I
L
R
O
N
M
L
M
O
O
K
O
T
T
A
H
E
E
T
D
B
E
S
A
D
O
P
E
I
I
E
I
G
C
E
A
C
M
E
D
A
H
H
P
H
F
L
T
H
T
E
A
E
N
E
N
H
K
O
C
U
E
O
O
T
R
R
R
A
I
C
C
E
A
D
O
N
I
M
P
E
U
V
H
C
N
U
M
T
S
M
T
I
N
D
C
U
R
H
S
S
E
O
S
L
E
O
M
D
T
A
E
D
E
S
S
T
A
E
I
D
O
M
E
R
O
C
A
B
E
E
S
S
D
I
S
P
S
N
T
H
L
D
B
E
N
E
I
P
R
N
P
A
I
E
T
O
E
U
T
N
A
O
S
M
H
L
P
H
L
N
H
D
O
I
E
R
E
A
R
L
S
P
I
O
H
M
T
T
P
S
B
A
T
R
O
G
C
N
H
U
I
N
O
N
O
U
C
E
C
E
R
L
R
R
R
S
P
T
T
S
I
N
C
D
I
I
P
V
E
E
C
S
R
F
O
C
O
B
O
D
N
I
A
I
D
O
I
G
H
V
M
E
G
T
T
P
U
S
P
N
D
V
D
U
T
S
H
O
M
P
E
M
N
C
I
H
N
M
D
O
P
A
X
H
U
C
M
O
P
G
I
E
D
G
S
A
D
O
R
R
D
G
T
N
P
T
E
C
C
N
O
D
A
L
N
S
N
H
E
U
D
C
Gross Domestic
Income
Expenditure
Inventory
Imports
Income Approach
Disposable
Per Capita
Value Added
H
R
M
I
D
E
A
C
C
R
T
S
N
S
N
N
T
H
G
R
O
D
A
H
S