Transcript File

Measuring Economic Activity
It is also called
NATIONAL
INCOME
ACCOUNTING.
Measuring
Economic
Activity
Economy’s output is
also called
AGGREGATE OUTPUT.
HOMEWORK
Wednesday 05 September 2012
Due on: Friday 07 [email protected]
Workpoint 13.1
1. Complete questions 1 and 2 on page 160.
2. Think about question 3.
Lets Check!
1.
Calculate the GDP of Canada in 2009 using the Expenditure method.
A. We know that GDP = C + I + G + (X-M).
C = 1,527,258
I = + 269,394
G = + 333,942
X-M = (438,553- 464,722 = - 26169)
GDP = 2,104,425 million CAD$
B. Consumption = 72.6% of GDP
Investment = 12.8%
Government = 15.9%
Net Exports = -1.2%
A closer look at the
EXPENDITURE APPROACH
Consumption
(C)
Investment
(I)
Government
Spending
(G)
Net Exports
(X-M)
The EXPENDITURE approach
measures the total amount of
spending (or expenditure) to
buy goods and services in a
country.
GDP
Gross Domestic
Product
GDP = C+I+G+(X-M)
GDP
GDP or Gross Domestic Product is a measure of
output produced in a country during a given
period of time.
DEFINITION – GDP is the market value of all
the final goods and services produced in a
country over a period of time (usually a year).
It includes:
• spending by households called Consumption (C ),
• spending by firms called Investment (I),
• spending by government called Govt. Spending (G)
• spending by foreigners on exports – spending on
imports called Net Exports (X-M)
A closer look at the
VALUE OF OUTPUT APPROACH
Farmer gets rubber
from the rubber tree
and sells it for $30.
He has added
value worth $30.
Tire firm owner buys the
rubber and converts it into
tires which he sells for $200
to the car manufacturer.
How much value has
he added ?
$170.
A car producer buys the tire
and uses it in his car
production . He sells the car
for $500 to the consumer.
How much value has
he added ? $300
If you sum up all the value that has been added, you get the total value added.
TOTAL VALUE ADDED = 30+170+300 = $500 This is also same as the price of the car.
A closer look at the
VALUE OF OUTPUT APPROACH
• What producers produce in 1 year.
• The VALUE OF OUTPUT approach measures the
value of each good and service produced in the
country over a period of time (a year) and then
adds them up to get the TOTAL VALUE OF OUTPUT
PRODUCED.
Value of Output (Agriculture) +
VALUE OF OUTPUT = Value of Output (Banking) +
Value of Output (Transport) +
etc.
A closer look at the
INCOME APPROACH
The INCOME approach adds up all the income earned
by the factors of production in the country over a
period of time (a year).
TOTAL WAGES +
TOTAL RENT +
NATIONAL INCOME =
TOTAL INTEREST+
TOTAL PROFITS
HOMEWORK
Friday 07 September 2012
Due on: Monday 10 [email protected]
Answer these questions in your classwork books. Please use
FULL SENTENCES.
1. Name the three flows shown in the Circular Flow Model.
2. Explain how firms are both buyers and sellers in the Circular
Flow Model.
3. What are the 4 factors of production and what are their
respective payments.
4. What is the difference between a closed economy and an
open economy.
5. Explain what happens when the size of leakages are larger
than the size of injections.
6. Read pages 161 and 162 of your textbook.