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______;
- 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 SalariesA. It is charged on products. It is not a main component of GDP, but it is included in the expenditure approach.
2. Corporate ProfitsB. It is a payment to share-owning households. Its profit is declared to the government.
3. Interest IncomeC. It includes interest paid on business loans and bonds, and royalty payments.
4. Proprietors’ Incomes and RentsD. It is the largest portion of the GDP. It includes direct payments to workers.
5. Indirect TaxesE. It is received by owners for supplying various types of resources to their businesses.
6. DepreciationF. It is the discrepancy between GDP figures.
7. Statistical DiscrepancyG. 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. Owner-occupied 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 from a given year
-Is used to compare in a given country over time
● Exchange-Rate adjustment
-Per capita GDPs are measured in a single
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 acquired by Canadians both______.
-Note that GDP focuses on the incomes______, GNP focuses on the______.
-To calculate GNP, two adjustments to GDP must be made;
- Income earned from Canadian investments is ______ from GDP
- Income earned from ______by Canadians is addedto 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
- The HDI rankings for rich countries are numerically ______, making it difficult to use these rankings in any meaningful way.
- Literacy figures for many countries are open to dispute.
- Increases in per capita GDP for rich countries are ______at higher and higher rates, a method criticized by some observers.
- 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 I E S T E B U R M G E A H A H E P O N C G N O H
O P E H C P E T A A X O D T D S R R I H D H C R R
D H E O E S N S I P R I O E O S O N E U I V I R M
O I A R T I R I E A M L P A N E C P R I I M H D I
O C N D H T L N C M O R E E I O A A E N P E N G D
I T P V O C D S I H E O I N M S B I A O V G M T E
P R B G E I A H N C P N I E P L E E R N E T D N A
E P M I T N K P I O O M E N E E E T L O E T O P C
C H G U R E T A I N C L I H U O S O S U C P P T C
A E R E A D T O M T N M G K V M S E P C S U A E R
H E I T U I O A R D A O C O H D D U I E R S X C T
O E S N O S R D S Y O O E C C T I T O C F P H C S
T L N N P K C D L D T K A U N A S N H E O N U N N
E X T P E R L S S S B O C E U E P A M R C D C O S
C E L T M R A V H S R T M O M D S O T L O V M D N
V L H I D U E L A P E T E O T E N S T R B D O A N
Y A R E E I A P P L S A D T S S T M P R O U P L T
O S R T M T S A K E U H A R M S H H S R D T G N H
H N I C I L H P V T S E H R T T L L B S N S I S G
M R I P H E E N O S E E H R I A D P A P I H E N R
P T A H M U I E O S O T P A N E B H T T A O D H O
C C C O U H I R I T A D H I D I E L R T I M G E D
O R C E T M G P S N T B F C C D N N O S D P S U A
T N N E P A K E K A I E L C U O E H G I O E A D H
I N N C T R R N D N I S T E R M I D C N I M D C S
Capital Stock Gross Domestic
Depreciation Income
Durable Goods Expenditure
Exports Inventory
Final Product Imports
GDP Income Approach
Purchases Disposable
GNP Per Capita
Net investment Value Added Nonmarket