ECMA06 – National Income 1
ECMA06 – LEC 01, LEC 02 & LEC 60
Introduction to Macroeconomics:
A Mathematical Approach
Winter 2012 ECMA06 – National Income 2
Introduction – About the Course
Professor: Iris Au
LEC 01 – Monday & Wednesday 2:00pm – 3:30pm, IC 130
LEC 02 – Monday & Wednesday 3:30pm – 5:00pm, IC 130
LEC 60 – Online
Tutorial: Throughout the week (starting next week)
* Same as ECMA04, lectures will be taped and available
online. ECMA06 – National Income 3
Need help for the course?
The TAs are your first option.
TA office: IC 225
Teaching Assistant Office hours
Henry Cao Monday 12:00noon – 2:00pm,
Wednesday 2:00pm – 4:00pm
Amy Chen Tuesday 2:00pm – 4:00pm,
Thursday 11:00am – 1:00pm
Yan Yan Chen Friday 11:00am – 12:00noon
Igor Mihajlovic Tuesday 1:00pm – 2:00pm,
Thursday 1:00pm – 4:00pm
Edward So Monday 11:00am – 12:00noon,
Tuesday 11:00am – 1:00pm
Huiguan Sun Monday 2:00pm – 4:00pm,
Wednesday 12:00pm – 2:00pm
Professor Au’s office hours:
Office: IC 286
Office hours: Monday, 11:00am – 1:00pm
Tuesday, 1:00pm – 2:00pm
Friday, 11:00am – 12:00noon
Course Coordinator: Arjuna Thaskaran
Email [email protected]
If you have any questions about viewing the online lectures
and/or the midterm grades, please contact her. ECMA06 – National Income 4
Recommended Text: Christopher T. S. Ragan and
Richard G. Lipsey, Macroeconomics, 13 Canadian edition,
Pearson Addison Wesley, 2011
Midterm 35% of the overall grade
Final Exam 65% of the overall grade
Bonus Marks ** a maximum of 3%
If you do better in the final exam, your midterm marks will
be replaced by your final exam marks (i.e., your final exam
will count for 100%).
**More on the Bonus Marks
You may earn a maximum of 3% bonus marks for this course
by participating in voluntary studies. Sign up at the following
Questions? email: [email protected]
How this work?
Suppose after writing the final exam, your course mark is 82%
(A-). If you participate in the voluntary research studies and
earn 3%, then FINAL overall mark will be 85% (A). ECMA06 – National Income 5
Grade Distribution – Winter 2011:
Grade % of class
80% – 100% 28%
70% – 79% 19%
60% – 69% 21%
50% – 59% 15%
0% – 49%* 16%
Class average C+ (68%)
* Including those who did not write the final exam. ECMA06 – National Income 6
Introduction & National Income
What is macroeconomics?
3 approaches to measure national income.
Gross national income vs. net national income.
GDP vs. GNP.
Nominal GDP vs. Real GDP.
GDP deflator. ECMA06 – National Income 7
What is Macroeconomics?
While microeconomics is about a specific market,
macroeconomics is about the economy as a whole (i.e. the
Macroeconomics is not simply a matter of adding things up,
because the dynamics are different, so we need a different
way than microeconomics to look at aggregate behaviour.
In macroeconomics, we are interested in issues like: national
income, unemployment rate, inflation rate, the exchange
rate, etc. ECMA06 – National Income 8
National Income – GDP
Why We Want to Measure Output?
Output measures the country’s economic activity – what
kind of goods and services we produced? What are the
levels of production?
A simple way to measure our standard of living and allows
us to compare it to other countries.
How To Measure Aggregate Output
We call the aggregate output as Gross Domestic Product
(GDP) – the total value of goods and services produced in
the economy during a given period.
There are 3 ways to measure GDP:
1)The expenditure approach Use by the government
2)The income approach
3)The value added approach ECMA06 – National Income 9
The Expenditure Approach
The expenditure approach, sometime called gross domestic
expenditure (GDE), sums up the expenditure needed to
purchase the final output produced during a given period.
Total expenditure is the sum of 4 major categories:
1)Consumption (C) – spending by households on goods and
2)Investment (I) – spending on goods that are not for
present consumption. There are 3 types of investment:
i) Business fixed investment – the purchases of capital
equipments, machinery and production plants.
ii) Residential investment – the building of new houses.
iii) Inventory investment – the change in the quantity of
goods that firms hold in storage, including materials
and supplies, work in process, and finished goods.
3)Government spending (G) – spending on goods and
services by different levels of government, exclusive of
government transfer payment. ECMA06 – National Income 10
4)Net exports (NX), NX = Exports (X) – Imports (IM)
Why net exports not exports?
GDP from the expenditure approach = C + I + G + NX
GDP, Expenditure Base, at Market Prices, $ millions, 2010
Private investment 293,447
Government spending 420,857
Statistical discrepancy 205
Source: Statistics Canada. ECMA06 – National Income 11
The Income Approach
The income approach looks at all the incomes earned by
Canadians as a result of production.
It takes into account of the followings:
Factor incomes – wages, salaries, interest, business
Non-factor payments – indirect taxes and subsidies,
capital consumption allowances (CCA), inventory
valuation adjustments (IVA) ECMA06 – National Income 12
GDP, Income Base, at Market Pr