Transcript Economics 12_Ch.10_lesson 1

Ms. Park
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Serena
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Consumption expenditures = $600
Exports = $75
Government purchases of goods and services= $200
Construction of new homes = $100
Imports = $50
Beginning of year inventory = $100
End of year inventory = $125
Business fixed investment = $100
Government payments to retirees = $100
Household purchases of durable goods = $100
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Consumption expenditures = $600
Exports = $75
Government purchases of goods and services= $200
Construction of new homes = $100
Imports = $50
Beginning of year inventory = $100
End of year inventory = $125
Business fixed investment = $100
Government payments to retirees = $100
Household purchases of durable goods = $100
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Your mother buys a new car imported from
Sweden
Your mother’s car rental business buys a new
car imported fro Sweden
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A student is paid for shovelling a neighbour’s
sidewalk
Unemployed carpenter receives an
employment insurance payment
A wealth-holder sells 1000 shares issued by
a Canadian corporation
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Page 220
Capital stock: the total value of assets
that provide a flow of revenue
Net investment: gross investment –
depreciation
Q: How much is Metrica's capital stock
expanding or contracting in 2001?
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Look at depreciation ($79 billion)
Look at gross investment ($157 billion)
Metrica is investing $157 billion BUT $79
billions are lost in repairing or replacing
durable assets
Net investment = $157 billion - $79 billion
= $78 billion
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Is GDP Expenditure method calculated using
Net Investment or Gross Investment?
Expenditure approach = Consumption +
Government Expenditure + Net Exports
(Exports – Imports) + GROSS INVESTMNET
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Inflation: General increase in the prices of
goods and services in an entire economy over
time.
Deflation: General decrease in the level of
prices
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If Canada has an annual inflation rate of 3%,
are all the prices rising?
Inflation does not mean all the prices are
rising. Some prices are rising, while other
prices constant or even decrease. It is that
OVERALL prices are rising in 3%.
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Consumer Price Index (CPI): a measure of
price changes for a typical “shopping basket”
of consumer products.
To determine what typical Canadian
households buy, Statistics Canada surveys
consumers’ buying habits every few years.
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Suppose the shopping basket includes only
two items: pizzas and colas. Survey in 2000
shows that, each month, an average
consumer buys 20 hamburgers at $2 each,
and 20 bottles of Cola at $1 each.
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If the CPI rose from 100 in 2010 to 115 in
2011, what is the inflation rate over the year?
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What is the difference between nominal
income and real income?
Nominal income: income expressed in
current dollars
Real income: income expressed in
constant base-year dollars
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Real income = nominal income/ CPI in
hundredths
EX. Nicole’s income rises from 40,000 to
45,000 during a year when the CPI rises from
100 to 110. If the consumer’s own monthly
purchases roughly correspond to those in the
representative “shopping basket,” what’s
Nicole’s personal impact of inflation?
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What would be some limitations of
CPI?
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Textbook Question #1
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Exit Slip:
Christine’s income rises from $34,000 in
2012 to $35,000 in 2013. Inflation rate
over the year is 6%.
a) What is Christine’s real income?
b) Explain whether following statement is true
or false: Since Christine’s income rose, she
has a higher standard of living.