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- Macroeconomics: The overall view of economy and economic activities.
- We measure our economy because it is to show the stability and instability of our economy.
- GDP is the measure of all spendings of that country in a year
- GDP Expenditure approach: Totaling the spendings on goods and services used. C+I+G+(X-M)
- GDP Income Approach: Totaling the income received on goods and services used.
- The problem with multiple counting was that the material purchased to build the good or services is also being
- counted again in the final product/services. Therefore, it is counted twice.
- C: CONSUMER SPENDINGS
- I: INVESTMENTS
- G: GOVERNMENT SPENDINGS
- X: TOTAL NET EXPORTS
- M: TOTAL NET IMPORTS
- GNP is the old way to calculate the wealth of Canada. It takes the Income and value of all goods and services being
- offered.
- Real GDP growth rate is when the GDP is taken out of its inflation.
- GDP PER CAPITA is the removing of the effect of the population onto the GDP
- Nominal GDP is the gdp that has not been adjusted for inflation
- GDP Deflator is the factor that takes out of the inflation rate.
- Some economists believe that the Gross Domestic Product (GDP) is not an accurate measurement of a country’s growth. GDP is merely a sum of national spending with no distinctions
- between transactions that add to well-being and those that diminish it. GDP counts the sale of alcohol, cigarettes, and pollution-producing goods as part of the production growth of a
- country. Fees associated with gambling, fees associated with divorce lawyer fees, and legal costs associated with crime all drive the GDP upward. Government expenditures on new
- prisons also increase the GDP.
- Underground Economy is the under the table approach of purchasing that are not included in gdp
- GPI is another way to measure standards of living
- CIW is an index that is a better measurement of quality of life in Canada
- Unemployment is the percentage of people in the labour force that are unable to find a job
- it is calculated by Unemployment in labour force/labour force
- Underemployment: this rate makes no distinction between part-time and full-time employment.
- Discouraged Workers: this rate does not take into account people who, are discouraged by unable to find work.
- Dishonesty: People responding to Stat Canada’s labour market survey may state that they are actively seeking work, when they really are not.
- Full employment: no cyclical unemployment exists, but frictional, and structural exists.
- Natural rate of unemployment (lowest possible rate ) exists with no inflationary pressures (stable inflation)
- Okun’s Law – for every 1% rise in the unemployment rate above the rate defined as full employment output falls by 3%
- Inflation: the general rise of prices.
- Calculating CPI is the difference between the CPI in the new year and the base year which is 100 in 1992. It is
- 100 because it is the start of the year where the prices have not been affected by inflation.
- How to calculate CPI: take a basket of goods (600) from each of the 8 major components each year and other basic classes and
- track the prices every compounding period.
- Major components
- 1. Food
- 2. Shelter
- 3. Household operations and furnishings
- 4. Clothing and footwear
- 5. Transportation
- 6. Health and personal care
- 7. Recreation, education and reading
- 8. Alcoholic beverages and tobacco products
- Indexing CPI
- CPI year 1 / CPI Year 2 = Wage year 1 / Wage Year 2
- Limitations of the CPI
- 1. Consumer Differences – individual consumption patterns do not always match those of the typical urban household.
- 2. Changes in Spending patterns – Stats Canada surveys Canadians regularly, however changes in consumption patterns are ongoing and gradual – eg. DVD players & cell phones.
- 3. Product Quality – the index can’t reflect changes in quality that are unmatched by changes in price. Thus, the standard of living may increase, but this will not be reflected in the CPI.
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