What is a summary measure of a country’s aggregate economic activity (total output of goods and services)?
GDP
The definition “total value of all final goods and services produced within a country during a particular year” defines:
GDP
What are the 5 limitations of GDP?
1 - exclusion of non-market transactions from the GDP
2 - does not account for inequality of income and wealth
3 - GDP rises with each environmental disaster, pollution, repair expenditure
4 - does not account for the depletion of natural resources
5 - GDP increases with war expenditures and postwar rebuilding activities
The Human Development Index ranks countries on a scale of _ to _
0 to 1
The low scale of HDI is from _ to _
0 - 0.499
The medium scale of HDI is from _ to _
0.5 - 0.699
The high scale of HDI is from _ to _
0.7 - 0.799
The very high scale of HDI is from _ to _
0.8 - 1
How are countries ranked in the HDI (3 developmental goals)?
1 - Standard of living (measured by real per capita income)
2 - longevity (measured by life expectancy at birth)
3 - knowledge or education (measured by the weighted average of adult literacy and mean years of schooling)
What is defined by the equal-weighted average of the 3 developmental goals?
HDI
How is HDI calculated?
1/3 (income index) + 1/3 (expectancy index) + 1/3 (education index)
______ is included in the GDP, whereas ______ and ______ is not included in the GDP
- Financial transactions
- Transfer of secondhand goods
- Other excluded transactions
What are the three types of transactions included in financial transactions?
1 - securities
2 - government transfer payments
3 - private transfer payments
What is the formula that measures the GDP in the expenditure approach?
GDP = C + I + G + NX
What defines spending on goods and services but my household for immediate use?
Personal consumption
3 types of C:
1 - durable or hard goods
2 - nondurable or soft goods
3 - services
What defines spending on goods but for future use?
Gross domestic private investment
3 types of I:
1 - Business fixed investment (investment by firms in physical assets)
2 - new residential construction by households and landlords (privately owned)
3 - inventory investment by firms (unsold goods)
What defines spending on goods and services by the government?
Government purchases (military, equipment, public roads, civil services)
What is the formula for net exports?
Exports – imports
When the net export is bigger than zero, there is a ______
Trade surplus
When the net export is smaller than zero, there is a ______
Trade deficit
When the net export = zero, there is a ______
Balanced trade
What is the formula that measures the GDP from an income approach?
GDP = NDI + Indirect taxes – Subsidies + Depreciation
What does NDI stand for?
Net domestic income at factor cost
How do we calculate the NDI?
Wages + corporate profit + farm and unincorporated business income + interest and investment income
What is defined as money earned by employees?
Wages and salaries
What is defined as money of corporations and government enterprises before taxes (paid out profits or dividends and on distributed or retained earnings)?
Gros corporate profit
What is defined as wages, rent, profit, interest income earned by farmers and unincorporated businesses?
Farm and unincorporated business income
What is defined as money earned on bank deposits, corporate bond holdings, and other incomes from financial assets?
Interest and investment income
What is defined as sales taxes paid by consumers on their purchases of goods and services (GST)?
Indirect taxes
What is defined as financial aid and grants given to private corporations by the government to reduce their production costs?
Subsidies
What is defined as the amount of money private firms spent on repairing their used for depreciated physical capital during the year?
Depreciation
Depreciation is also known as:
Capital consumption allowance
What does NDP stand for?
Net domestic product at market prices
How is the NDP calculated?
NDI + indirect taxes – subsidies
Income earned within Canada by Canada’s workers and investors defines both ____ and ____
GDP and GNP
What includes income earned within Canada by foreign workers and investors? It is excluded in what?
included in GDP; excluded in GNP
What includes income earned abroad by Canadian workers and investors? It is excluded in what?
included in GNP; excluded in GDP
What is the formula to calculate GNP?
GDP + net income from abroad
Net income from abroad =
income – outcome = abroad money – country money
When NIA = 0
GDP = GNP
When NIA > 0
GDP < GNP
When NIA < 0
GDP > GNP
What is defined as the value of current output measured in terms of current prices?
Nominal GDP
What formula calculates nominal GDP?
Σ (Current year Price x Current year quantity) = Σ (P • Q)
What is defined as the value of current output measured in terms of some base year constant prices?
Real GDP
What formula calculates real GDP?
Σ (Base year Price x Current year quantity) = Σ (BP • Q)
