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Measuring Economic Activity

Measuring Economic Activity. HOMEWORK Wednesday 05 September 2012 Due on: Friday 07 September@9.00am. Workpoint 13.1 Complete questions 1 and 2 on page 160. Think about question 3. Lets Check! Calculate the GDP of Canada in 2009 using the Expenditure method.

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Measuring Economic Activity

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  1. Measuring Economic Activity

  2. HOMEWORK Wednesday 05 September 2012Due on: Friday 07 September@9.00am • Workpoint 13.1 • Complete questions 1 and 2 on page 160. • Think about question 3. • Lets Check! • Calculate the GDP of Canada in 2009 using the Expenditure method. • 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 Government = 15.9% • Investment = 12.8% Net Exports = -1.2%

  3. The EXPENDITURE approach measures the total amount of spending (or expenditure) to buy goods and services in a country. A closer look at the EXPENDITURE APPROACH GDP = C+I+G+(X-M)

  4. 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) GDP

  5. A closer look at theVALUE OF OUTPUT APPROACH A car producer buys the tire and uses it in his car production . He sells the car for $500 to the consumer. Tire firm owner buys the rubber and converts it into tires which he sells for $200 to the car manufacturer. Farmer gets rubber from the rubber tree and sells it for $30. How much value has he added ? He has added value worth $30. How much value has he added ? $300 $170. 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.

  6. 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 = A closer look at theVALUE OF OUTPUT APPROACH Value of Output (Agriculture) + Value of Output (Banking) + Value of Output (Transport) + etc.

  7. The INCOME approach adds up all the income earned by the factors of production in the country over a period of time (a year). NATIONAL INCOME = A closer look at the INCOME APPROACH TOTAL WAGES + TOTAL RENT + TOTAL INTEREST+ TOTAL PROFITS

  8. HOMEWORK Friday 07 September 2012Due on: Monday 10 September@9.00am • Answer these questions in your classwork books. Please use FULL SENTENCES. • Name the three flows shown in the Circular Flow Model. • Explain how firms are both buyers and sellers in the Circular Flow Model. • What are the 4 factors of production and what are their respective payments. • What is the difference between a closed economy and an open economy. • Explain what happens when the size of leakages are larger than the size of injections. • Read pages 161 and 162 of your textbook.

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