3. GDP (Gross domestic product)
-The total value of all ﬁnal goods and services produced in the economy during a given yearfo.
-Final goods and end users are not the same as count intermediate goods and services
-The value of products produced within the country (produced in Canada).
4. Measuring GDP (3 ways)
The value-added approach:
-focuses on the value added of each producer in the economy.
-Value added = Value of the sales - Value of the purchase of intermediate goods and services.
The Expenditure Approach:
GDP = C+I+G+NX = aggregate expenditure(AE)
-Consumption (C) : spending by households on goods and service
-Investment (I) : spending money not for present consumption (private & public)
•Business ﬁxed investment: The purchase of capital equipment, machinery and production
•Residential investment: Building of new houses
•Inventory in vestment: Firms hold in storage (materials , supplies, working process and ﬁnished
-Government spending (G) : Including spending on goods and services by different !
levels of government( EX:subsidy, child care beneﬁt), exclusive of government transfer
-Net exports (NX): NX = Exports (X) – Imports (IM)
The Income Approach:
Income earned from production of goods and services
•There are two sources of income:
A. Factor incomes: income earned by factors of production or inputs such as wages, salaries,
interest, rent business proﬁts.
B. Non-Factor incomes: Net indirect taxes, capital depreciation.
Three approaches —— the same result
One person’s spending = another’s income