Textbook Notes (363,381)
Canada (158,358)
Economics (800)
ECON 1100 (224)
Chapter 5

Chapter 5

3 Pages
Unlock Document

University of Guelph
ECON 1100
Eveline Adomait

Chapter 5: Measuring Economic Activity: GDP and Unemployment Gross Domestic Product: Measuring the Nation’s Output - Most common measure of an economies output = GDP (measures how much is made during a given period) GDP: the market value of the final goods/services produced in a country given a specific period - Market Value  Services provided by government employees is generally not market place therefore included in GDP  Goods/services produced by unpaid household labour for use within household (mowing the lawn) is NOT included in GDP - Final Goods and Services  Summing all value added by all firms in the production process yields the value of the final good/service Final Goods or Services: consumed by the ultimate consumer, b/c they are the end products of the production process they are counted as part of GDP Intermediate Goods or Services: used up in the production of final goods/services and therefore not counted in GDP Value Added: the market value of its product or service minus the cost of inputs purchased from other firms (revenues-cost of intermediate goods=value added) The Expenditure Method for Measuring GDP - GDP is a measure of the quantities of the goods/serviced produced by an economy - Divide goods into four categories: households, firms, governments, and the foreign sector - Relationship between GDP and expenditures of goods/services can be summarized by this equation… Y=C+I+G+NX  Where…  Y= GDP or Output  C= Consumption Expenditure  I= Private-Sector Investment  G= Government Purchases  NX= Net Exports Consumption: spending by households on goods and services (food, clothing, entertainment)  Divided into four subcomponents: durable goods, semi-durable goods, non-durable goods, services Private-Sector Investment: spending by firms on final goods/services, primarily capital goods and housing  Divided into three subcomponents: non-residential structures and equipment, residential structures, business investment in inventories Government Purchases: purchases by federal, provincial and municipal governments of final goods/services do NOT include government transfer payments or interest paid on public debt  Divided into two major subcomponents: net government current expenditure on goods/services (e.g. office supplies), and government gross fixed capital formation (e.g. buying new structures/equipment) Net Investment: investment that adds to the total capital stock of the economy Net Exports: exports – imports Who Makes Type of Expenditure Example the Expenditure Households Consumption Food, Clothes, Hair Cuts, New Car Firms Private-Sector New Factories/ Equipment/ Houses, Investment Increase in Inventory Stocks Governments Government Purchases New School Buildings/ Roads, Docks,
More Less

Related notes for ECON 1100

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.