1 Theme 3 : Economic indicators v1.0 Part I:GDP and Economic Growth
2 Principle # 8: The standard of living of a country depends on its ability to produce goods and servicesWe can represent this principle by the following circular flow:Production income consumption production
3 What in the Gross domestic product? The Gross Domestic Product (GDP) is themonetary value of the total production of final goods or servicesproduced in an economyduring a given period
4 For example :Canadian GDP in 2012, is the monetary value (market price) of all product and services has been produced in Canada from January 1 to December 31. around Billions $ US1 according to the World Factbook
5 What is the use of GDP?A tool for comparing countries' wealth (GDP per capita)A measure of the economic growth of a country
6 What are national accounts? It is the calculation of gross domestic product. We must proceed very methodically.
7 What are the basic concepts of the national accounts? 1st Production is purchased by a user and gives rise to an expense.2nd Production gives rise to manufacturing revenues.
8 How do we measure GDP? of expenditures generated from the production of goods and services. of incomes generated from the production of goods and services. expenditures = GDP = incomes
9 How do we measure GDP by expenditure? GDP = C + I + G + X – MEverything that was purchased had to be produced. So calculating the value of everything we buy is gives us indirectly the value of what was produced.
10 What is the difference between final goods and intermediate goods? Final goods are intended solely for the end user. We calculate only this production to assess GDP.A good is qualified as intermediary, when it is used in the production of another good.
12 Why should we add the value of exports and remove the value of imports? Canadian exports means a production undertaken in Canada but purchased by an economic agent from another country.Canadian imports means a production done abroad but purchased by economic agents in Canada.
13 Should never count the same property more than once … Intermediate goodsUsed Goods
14 How do we measure GDP by the income approach? GDP = Wages + profit + interest + rent.The production of goods and services generates revenue. So by calculating all income from the production, the value of production can be obtained.
16 Warning…Only income from the production of goods and services are recognized excluding transfer payments (unemployment insurance, pensions ...).
17 What is the difference between real GDP and nominal GDP? Nominal GDP measures the value of domestic production prices from the current year (GDP in current dollars).Real GDP measures the value of domestic production from the prices of a base year (constant dollars)