ECON 1BB3 Lecture Notes - Lecture 6: Gdp Deflator, Market Basket, Academic Dishonesty

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ECON 1BB3 Lecture 5: Production and Prices in Canada; Unemployment/Inflation
Midterm 1
- Average was 75%
o Midterm 2 average will be significantly lower, be prepared for it
- Investigating 3 instances of academic dishonesty on the test
Canadian GDP - 4th Q (annual rate)
- Equation: 𝑌 = 𝐶 + 𝐼 + 𝐺 + (𝑋 − 𝐼𝑀)
- Consumer spending about 6% of GDP in Canada
o -¾ in the states
Obsessed with consumer competence
When consumers are confident, they spend more
When they are nervous about the future, they stop spending
o Investment spending about 20% but fluctuated much more
o Government spending is higher in Canada than US
Healthcare, education
o Net Exports: very small fraction of GDP
Sometimes negative, sometimes positive
Currently positive
o 4th Quarter at annual rates - take actual numbers for GDP
Multiply by 4 to allow for comparison throughout the year
Chapter 6
- Read GDP, nominal GPDP - measures of output
- CPI, GDP deflator - measures of overall price level
- Calculations: nominal GDP, real GDP, GDP deflator, cost of CPI basket, CPI, inflation
- GDP vs. GNP
- Using CPI (or GDP) deflator) to compare dollar values across time
- Upcoming chapters become denser, more difficult
Housing in the GDP
- New housing included as “investment spending”
o the year it is built (last a really long time, provides a flow of services each year)
o Think about everything else that a household buy
Car, appliances, furniture, etc.
- Sale of an existing home is NOT included as part of GDP - it is the transfer of an existing
asset, nothing new is being produced
o GDP is a definition that is worth memorizing, word for word
o Services provided by real estate agent would count
o Existing good being sold
- Rent vs. owner-occupied housing
o Both provided a service to families in the form of shelter, are a very large
component of budget (mortgage), both are included in “consumption – services)
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