Lecture 12 - ECO 100Y Introduction to Economics Lecture 12:...

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
© Gustavo Indart Slide 1 ECO 100Y Introduction to Economics Lecture 12: National Income Accounting
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
© Gustavo Indart Slide 2 Gross Domestic Product ± Gross Domestic Product (GDP) is the value of all final goods and services produced in Canada during a given period ± GDP is a flow of new products during a period of time, usually one year ± We can use three different approaches to measure GDP: ¾ production approach ¾ expenditure approach ¾ income approach
Background image of page 2
© Gustavo Indart Slide 3 Measuring GDP ± Production Approach – We can measure GDP by measuring the value added in the production of goods and services in the different industries (e.g., agriculture, mining, manufacturing, commerce, etc.) ± Expenditure Approach – We can measure GDP by measuring the total expenditure on final goods and services by different groups (households, business, government, and foreigners) ± Income Approach – We can measure GDP by measuring the total income earned by different groups producing goods and services (wages, rents, profits, etc.)
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
© Gustavo Indart Slide 4 Flow of Expenditure and Income FACTOR MARKETS GOODS MARKETS FIRMS HOUSEHOLDS Labour, land Labour, land Goods & services Goods & services Wages, rent & interest Expenditures on goods & services
Background image of page 4
© Gustavo Indart Slide 5 The Production Approach ± GDP is the value of final goods and services produced in Canada within a year ¾ The emphasis on the word (goods and services) is important in order to avoid double counting ± If we were to consider also the value of intermediate goods, then their values would be counted twice: ¾ as an output of the industry producing this intermediate good ¾ as part of the value of the final good of the industry that uses it as an intermediate good
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
© Gustavo Indart Slide 6 The Production Approach (cont’d) ± To avoid this double counting we must consider only the value added in each industry or at each stage in the process of manufacturing a good ± The by a firm is the difference between the revenue the firm earns by selling its product and the amount it pays for the product of other firms it uses as intermediate goods
Background image of page 6
Slide 7 Example ± Suppose that the production and sale of bread in a given period of time is $1000, and that the flour used in the production of this bread costs $400 ± Also suppose that $200 worth of wheat is needed to produce this $400 worth of flour ± What is the contribution of these activities to GDP? ± The contribution to GDP is only $1,000 since bread is
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 8
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/16/2011 for the course ECO ECO100 taught by Professor Inheart during the Fall '09 term at University of Toronto.

Page1 / 25

Lecture 12 - ECO 100Y Introduction to Economics Lecture 12:...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online