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Transcript of GDP
GDP Limitations and Drawbacks
How To Calculate GDP
The Difference Between Real and Nominal GDP
Real Gross Domestic Product (real GDP) is the total value of all goods and services produced in Canada in a given year, adjusted for price changes also known as constant dollars GDP.
Nominal GDP is the total value of GDP before it is adjusted for price increases also known as money GDP.
Canada's Current GDP
Income level: High income
Population total: 35.19million
Canada's economy is highly developed
The Gross Domestic Product (GDP) in Canada expanded 0.80 percent in the second quarter of 2014 over the previous quarter.
Canadian GDP rose 0.8 percent in the second quarter of 2014, following a revised 0.2 percent increase in the first quarter. ( Statistics Canada)
Formula: GDP = C + I + G + (X – M)
GDP does not take into account the leisure time and also how hard people work to produce output
Changes can be understated
People do not work 24 hours a day
2 DIFFERENT APPROACHES TO CALCULATE GDP
We do not need to know this
4 MAIN COMPONENTS
Consumption (C) -
Personal consumption expenditures. They are separated into the following categories: services, durable goods, non-durable goods.
GDP does not take into account the negative effects of economic production (e.g pollution, air pollution etc.)
Such as pollution are not included in the GDP stats
Weather effects the amount of agriculture being produced
Investment (I) -
Net Exports(x)- National Imports (M) -
Gross Private Investment; generally separated into either fixed investment or changes in business inventories.
The government’s spending on items that are “consumed” in the current period, such as gasoline and capital goods, such as highways.
Exports (X), are goods and services produced domestically and sold to foreigners. National Imports (M), are goods and services produced outside the country and consumed within the country.
Expenditure Approach Formula: GDP = C + I + G + (X - M)
Canada's GDP over ten years
shows how much money is circulating the economy
higher GDP means the economy is doing good
factors that could affect the economy are:
environmental disaster, unemployment, supply and demand, and trade
income is not distributed evenly to each person
People are paid differently based on their occupations
Changes in consumption
The GREATER Consumption results to MORE product created = Higher GDP
The LESS Consumption results to LESS product created = Lower GDP
If countries borrow money, the GDP rises
If countries lend money, the GDP lowers
If a country Imports more than it exports = Lower GDP
If a country exports more than it imports= Higher GDP
If Investment rate will rise it will create a positive effect on GDP
If Investment rates will drop it will create a negative effect on GDP
Why is Canada's GDP so high?
Foreign trade- the foundation of Canada's economy
about 45% of Canada's GDP
USA is our largest trading partner
Canada is one of the few developed nations that is an exporter of energy
it is not included in the GDP Statistics
statistics have estimated that the value of these activities would add between 3 and 20 percent to the overall value of the GDP
Think about purchasing a good and not receiving a receipt
Comparing the GDP for different years may be misleading if the population of the country has changed
Effects how much is consumed and invested by the government
GDP does not count volunteer services and the productive services of homemakers
Outputs with no dollar value are not included (eg. home renovations)