CIA4U Economics Chapter 8

GDP

Gross Domestic Profit (GDP)

The total dollar value at current prices of all final goods and services produced in Canada over a given period

Income Approach

A method of calculating Gross Domestic Product by adding together all incomes in the economy

Expenditure Approach

A method of calculating Gross Domestic Product by adding together all spending in the economy

Per Capita GDP

GDP per person

Formula: GDP per Capita = GDP ÷ Population

List: Limitations of GDP

1. Excluded Activities (Non-market/Underground)

2. Product Quality

3. Composition of Output

4. Income Distribution

5. Leisure

6. Environment

Non-Market Activities

Productive activities that take place outside the marketplace (eg. housework)

Underground Economy

All the market transactions that go unreported (eg. smuggling/drug dealing)

List: Seven Classes of Income for calculating Income Approach

1. Wages/Salaries

2. Corporate Profits

3. Interest Income

4. Proprietors’ incomes and rents

5. Indirect Taxes

6. Depreciation

7. Statistical Discrepancy

List: Four Components of calculating Expenditure Approach

1. Personal Consumption (C)

2. Gross Investment (I)

3. Government Purchases (G)

4. Net Exports (X-M)

Personal Consumption (C)

Household spending on goods and services

Gross Investment (I)

Purchases of assets that are intended to produce revenue

Government Purchases (G)

Current government spending on goods and services

Net Exports (X-M)

Exports minus imports

Net Investment

Gross Investment minus depreciation