Macroecon chapter 5 Flashcards
Approaches to measure GDP (3)
- Value added
- Expenditure
- Income
Value added approach formula
GDP = Y = ∈VA of industries in the country during 1 year = TR-TC
Expenditure approach formula
Y = C+I+G+(X-iM)
Main contributor to Canadian GDP
Bank/finance industry
Difference between GDP and GNP
GDP: based on geography
GNP: based on nationality
Income approach
GDP = Y = ∈ Income of production factor = factor of income (wages-interest- Business profit) + indirect taxes - subsidies + depreciation
TR meaning
Total revenue sale of final good
TC meaning
Total cost of intermediate good
Net income formula
Gross income - depreciation
GDP deflator formula
(nominal GDP / real GDP) x 100
Meaning of change in GDP deflator
Price change of GDP items (C, I, Nx)
Difference between CPI and GDP deflator
CPI: Price change of consumer good
GDP deflator: Price change on goods produced
Is the usage of per capita as an indicator of living standard efficient?
No
Is the contribution of GDP measurable?
Yes
Double counting
Error in estimating GDP by adding all sales of all firms
Capital Stock
The economy’s total quantity of capital goods
Fixed investment
Creation of new capital goods
GDP deflator
Changes in prices for all the goods and services produced in an economy
Outside the market economic activities (5)
- Illegal activities
- Underground economy
- Home production, Volunteering, Leisure
- Free products in the digital world
- Economic “Bads”
