1.  How do living standards in Canada compare with past living standards?  How does Canadian economic performance compare with that of other countries?  Per Capita GDP helps answer these questions  GDP Per Person 8.2 GDP & Living Standards

2.  Prices change over time, so per capita GDP must be adjusted to compare different times  Real GDP  GDP expressed in constant dollars from a given year (2002 is currently the reference year)  From this, we can also derive a per capita real GDP (per person) Inflation Adjustment

3.  To compare various countries’ per capita GDP we must adjust for different currencies  Do this by expressing all countries’ GDPs in one currency  Standard is the American Dollar Exchange Rate Adjustment

4.  Non-market activities  Housework, unpaid child care – things outside the marketplace  Underground economy  Smuggling, “under-the-table” transactions – all market transactions that go unreported Excluded Activities

5.  GDP doesn’t take into account:  Product Quality – technology has risen a lot with quality  Composition of Output – tells us nothing about what is produced and purchased (e.g. military or education based?)  Income Distribution  Leisure – most people see leisure as a requirement for a satisfactory standard of living; it is not sold/bought in the market  The Environment – doesn’t differentiate between economic activities that are harmful to the environment and those that are not Limitations of GDP Calculation