Chapter 4 Economic Overview Flashcards
Income approach to GDP
Add up all income from Consumer, Businesses and government to get the GDP
Expenditure Approach to GDP
Add up all costs of Consumer, Business and government goods and services.
Production Approach to GDP
Add up the value of all goods and services and subtract the cost to produce them.
What are the five phases of the Business cycle?
Expansion, Peak, Contraction, Trough, Recovery.
Name examples of Leading indicators.
Housing starts, commodity prices, stock prices, money supply, and hours worked per week.
What is the Participation rate?
The amount of the labour force that is currently employed.
Explain the determinants of the interest rate?
- Supply and demand of capital
- Default risk of businesses and government
- Foreign interest rates and the exchange rate
- Central bank credibility
- Inflation
What are some costs of inflation?
- Erosion of the standard of living
- Can reduce value of investments
- Distorts price signals
- Brings rising interest rates and recessions
Name some examples of coincident indicators.
Personal income, industrial production, retail sales.
Name some examples of Lagging indicators.
Unemployment, Inflation, labour costs, plant and equipment spending, and business loans and expenses.
What is an exchange rate?
The rate that one currency is sold for another is the exchange rate.
Importing, exporting and investing in foreign markets requires buying and selling of foreign currency.
List the determinants of an exchange rate.
Commodities Inflation Interest rates Trade Economic performance Public debts and deficits Political stability
What is the balance of payments and the two accounts it is divided into?
The balance of payments is a statement of Canadas transactions with other countries.
Current account - is all the imports and exports and net transfers including foreign aid.
Capital and financial accounts - is the inflow and outflows of investments in and Canada and abroad.
