Chapter 2:The Measurement and Structure of the Canadian Economy

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Chapter 2The Measurement and Structure of the
Canadian Economy

• National Income Accounts An accounting
  framework to measure current economic activity.
• Three approaches to measure national economic
  activities
• 1) Product Approach The amount of goods and
  services excluding intermediate goods and
  services produced (Value Added).

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• 2) Income Approach Income received by factors
  of Production
• 3) Expenditure Approach Amount of spending by
  the ultimate purchasers/buyers
• Fundamental Identity of National Accounts
• Total Product Total Income Total Expenditure

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• Product Approach
• Gross Domestic Product (GDP) The market value
  of final goods and services newly produced in a
  nation within a specified period of time.
• Gross National Product (GNP) GDP Net Factor
  Payment from Abroad (NFP)
• NFP Income paid to domestic factors of
  production by the rest of the world Income paid
  to foreign factors of production in the domestic
  economy.

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The Expenditure Approach

• Gross Domestic Product (GDP) Total spending on
  final goods and services produced within a nation
  during a specified period of time.
• Y GDP Consumption (C ) Investment (I)
  Government Purchases (G) Net Exports (NX)

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• Consumption
• Consumer Durables
• Semi-Durable
• Non-Durable
• Services
• Investment Inventory Investment Fixed
  Investment
• Fixed Investment
• Residential Construction
• Non-Residential Construction
• Machinery and Equipment Investment

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• Government Purchases Government expenditure
  excluding Transfer Payments and Interest Payments
  on the government Debt.
• Net Exports Exports Imports
• Income Approach
• GDP Total income received by factors of
  production in a nation within a specified period
  of time.

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• Labor Income
• Corporate Profits
• Interest and Investment Income
• Unincorporated Investment Income
• Net Domestic Product at Factor Prices 1234
• Net Domestic Product at Market Prices Net
  Domestic Product at Factor Price Indirect
  Taxes - Subsidies
• GDP Net Domestic Product at Market Price
  Depreciation

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• Private Disposable Income Y NFP TR INT -
  T
• Net Government Income T TR INT
• GNP Private Disposable Income Net Govt.
  Income Y NFP

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• Saving Current Income Current Spending
• Private Saving (SPVT) Private Disposable Income
  C Y NFP TR INT - T- C
• Government Saving (SGOVT) Net Government Income
  Government Purchases (T TR INT) G
  Budget Surplus/Deficit

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• Uses of Private Saving
• S I (NX NFP) I Current Account Balance
  (CA)
• S SPVT SGOVT I CA
• SPVT I - SGOVT CA

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• Nominal Vrs Real Variables
• Real GDP Nominal GDP / GDP Deflator
• GDP Deflator measures the overall level of prices
  of goods and services included in GDP.
• Consumer Price Index (CPI) Measure of prices of
  consumer goods