Chapter 9: Measures of Economic Activity
9.1 Gross Domestic Product - Day 1
National Income Accounts
 Show the levels of total _______________ and _______________ in the
Canadian economy
 Allow us to ________________ the performance of the Canadian economy and to
________________ it with the economies of other countries
Measuring Gross Domestic Product (GDP)
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GDP is the total dollar value at current prices of all ___________ goods/services
produced in Canada over a given period
There are 2 methods to calculate GDP; using the _______________ approach and
the ________________ approach
The income approach measures GDP by adding together all ________________
in the economy
The expenditure approach measures GDP by adding together all
________________ in the economy
GDP Identity

GDP expressed as ________________________ is the same as GDP expressed as
_________________________
The Income Approach
GDP = w________ + c_________ + i_________ + p________ (including rent) +
i__________ + d__________ + s___________
W ________
- ______ income category
- direct payments as well as employee benefits (employee pension funds) in business and
government
C__________
- all corporate profits declared to government including :
- profits paid as corporate income tax
- profits paid out to corporate shareholders as dividends
- profits put back into the business (r______ earnings)
I_________
business loan, bonds interest
-
not include _______________________ since those are viewed as transfers of
purchasing power
P____________
- earnings of sole proprietorships and partnerships include self-employed professionals
and farmers
- received for supplying resources to their businesses
I
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D
-
Taxes
charged on products
____________ is not included in the ________ components of GDP but in the
_________ approach.
cost for d_____ assets (buildings, equipment, and tools)
shows up in product prices
shows up in both ________ and ________ approach to GDP
S___________
discrepancy between ______ GDP and ________ GDP
to balance the difference, half amount is ______ to the _______ estimate and
half is ______ from the _______ estimate.
The Expenditure approach
The Expenditure Approach
-
GDP found using the expenditure approach is the ______of purchases in product
market.
We must first distinguish between______________________. Later, we will examine
the categories of expenditures.
Final products
- products that will___________________________and________________________.
Intermediate products
- product that will___________________________or_________________.
Double-counting
- the problem of ________to GDP the same item at________________in its production.
-
Value added
the extra worth of a product at ______________in its production; a concept used to
_________________________________GDP.
E
___
Purchases_____
-
there are types: ________________________and____________________________.
Give an example for each type
1. __________________________________________________.
2. _____________________________________________________.
Included Purchases

The expenditure equation states that GDP is the sum of
______________________________ (C),
___________________________________ (I),
__________________________________ (G), and
__________________________ (X-M)
 Expenditure equation: GDP = C + I + G + (X-M)
Personal Consumption (C)
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Personal consumption is __________________ spending on goods/services
(largest component of GDP)
_________________ goods are only consumed once
_________________ goods are consumed over time
Gross Investment (I)
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Gross investment is purchases of assets that are intended to produce
______________
The most important spending in this category is on ________________ and
_________________ used by businesses
Stocks of unsold goods and materials are called _____________________
Since these inventories produce income, an _________________ in an economy’s
inventories over a given year is seen as ______________ investment spending,
while a ________________ in inventories is seen as a _______________
investment spending
_________________________ is the total value of productive assets that provide
a flow of revenue
The decrease in value of capital assets are known as ____________________
Net investment is found by subtracting annual depreciation of an entire
economy’s __________________________ from
__________________________________
Money used for capital investment do not only come from businesses’ profits, but
also from households __________________________
Government Spending (S)
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The current amount of ________ on goods and ___________ made by all levels
of the government
Government spending is financed through __________ taxes, ____________
taxes, and borrowing
However, there are a few exemptions when calculating government spending
Transfer Payments – payments from one _______ of government to another or to
______________
Subsidiaries – the government assists its businesses and citizens through financial
support
o Subsidiaries and transfer payments are known as ________________
taxes (tax payments in reverse)
o Exempted because it is a _____________ of purchasing power
Investment Expenditures – investments that generates ________ income (already
included in the Gross ______________ (I) calculations)
Net Exports (X-M)
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Exports (___): _______of Canadian goods in the global market place
Imports (___): _______ purchases of goods and services ____ the global market
pace
Net Exports = X (__________) – M (__________)
9.2 GDP and Living Standards
 Per Capita GDP, or known as GDP per person, is used to measure _________
standards
 These living standards are then compared to ____________ countries and
Canada’s ______
 GDP Per Capita = GDP / ________
Adjustments
 Inflation Adjustment – where past GDPs are adjusted for ________
 This is also called the _______ GDP, used to compare current and previous GDPs
despite inflation
 Often used to figure out the __________ real GDP, or real GDP per person
 Per Capita Real GDP = Real GDP / Population
 Exchange Rate Adjustment – Comparing various countries’ GDP per capita in a
_________ currency, usually the ________
Excluded Activities
-
GDP represents ______________________________ exclude some productive
activities
N
_
- (housework, unpaid child care, work of “do-it yourselfers”)
- have vital impact on living standards
U____________
P ___________Quality
-GDP which can only add up______________, cannot fully capture
these_____________________________.
C ______of__Output______
- while the GDPs may be the ________,the countries’ living standard would
_________considerably.
I____________Distribution_______
-
Citizens in two countries with the same per capita GDP man have very
different_________________ if one country’s income is widely distributed, while
most of the other country’s income is in the hands of a_______.
L______________
- ________________is not bought and sold in the market, so it___________ be
accounted for by GDP.
The______E___________
-GDP dose not differentiate between____________________ are harmful to the
______________and those that are not.
9.3 Other Economic Measures - Day 2
Gross National Product (GNP)
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GNP is the total _______________ acquired by Canadians both within Canada
and elsewhere
GDP focuses on the incomes made in Canada, while GNP focuses on the
________________ of Canadians
To calculate GNP, two changes to GDP must be made:

1. Income earned from Canadian _____________________________ by the
rest of the world must be ________________ from GDP to determine
GNP because these earnings are not a part of the earnings of Canadians
2. Income earned from financial investments by Canadians in the rest of the
world is ____________________ to GDP to determine GNP because
these earnings are a part of Canadians income
Disposable or ______________ income, is income after the payment of income
taxes, that can either be consumed or saved