E payment to a non canadian factor of production

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Unformatted text preview: ion For instance, it includes the profits of General Motors (i.e., payment to a non Canadian factor of production) how'much'income'is'available Gross National Product (GNP) measures the contribution of Canadian factors of production both within and outside Canada For instance, it includes the profits of Nortel in Mexico (i.e., payment to a Canadian factor of production) GNP includes the incomes earned only by domestic owners of factors of production profits'that'are'made'by'a'Canadian'foreign'branch © Gustavo Indart Slide 22 Real and Nominal GDP Nominal GDP measures the value of output in a given period in the prices of that period, that is, in current dollars Nominal GDP changes from year to year because the physical output changes and also because market prices change Real GDP measures the value of output in a given period in the prices of a base period, that is, in constant dollars Therefore, real GDP changes from year to year only because the physical output changes © Gustavo Indart Slide 23 change'in'goods'produced'in'Canada GDP Deflator The calculation of real GDP gives us a useful measure of inflation known as the GDP Deflator or GDP Implicit Price Index The GDP Deflator shows the change in the price level taking into account current physical output GDP Deflator = GDP measured in current prices GDP measured in base year prices x 100 Note that the GDP Deflator for the base year is always equal to 100 © Gustavo Indart Slide 24 change'in'price'of'consumer'goods Consumer Price Index The Consumer Price Index (CPI) shows the change in the price level taking into account a constant bundle of goods Value of goods measured in current prices CPI = x 100 Value of goods measured in prices of base period © Gustavo Indart Slide 25...
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This note was uploaded on 03/28/2014 for the course ECON 100 taught by Professor Carr during the Summer '10 term at University of Toronto.

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