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MGTA01H3 (583)
Chapter 5

MGTA01H3 Chapter 5: business chp 5
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Department
Management (MGT)
Course
MGTA01H3
Professor
Chris Bovaird
Semester
Winter

Description
Chapter 5 Measuring Economic Performance: Introduction • the purpose of an economic system is to produce the things that a country’s people need and want Measuring Total Production- Gross Domestic Product • gross domestic product (GDP): the total value of all of the goods and services that are produced within a country, during any given period. • most definitions of GDP emphasize the goods/services produced within “a country” however GDP is also calculated for provinces, states, territories and cities • country with the largest GDP is the United States of America (4th largest by area and 3rd largest by population • GDP is most often expressed in US dollars to make comparisons b/w the U.S. and all other countries the county with the world’s second largest economy is China • • together, China and the U.S. produced more then one-third of all the goods and services made on earth • Canada ranks 11th; medium sized population but large economy Limitations of GDP- What It Does Not Tell Us • GDP tells us something important about a nation’s economy: size • GDP only tells us about size; it does NOT tell us whether a country’s output is growing or declining nor does it tell us whether a country’s citizens are rich or poor • GDP also does not tell us whether all of the resources in a country (for example all of the workers are equally busy or productive) • we will not know if for example that a small number of workers are dis-proportionately producing the output while unemployed workers are producing less GDP Growth: • GDP growth: the percentage change, from one period to the next, in the total value of all the goods and services produced within a country • GDP growth suggests that more businesses are hiring people to produce more goods and services (more products/services available for sale) • in the past decade, GDP growth in Canada has averaged 2.0% in recent years, it has ranged b/w 1-3% • • some say that Canada’s GDP growth rate is rather like our national character: steady, reliable and unspectacular Recession-When The GDP Does Not Grow • in 2009, Canada’s GDP shrunk • when GDP falls, a number of things might happen (1) perhaps fewer workers will be employed (2) people will work shorter hours and have fewer shifts; offices may close earlier • when GDP fails, it suggests that Canada’s businesses aren't as busy making the goods and services people want Recession: Two consecutive quarters (two periods of three months each) when GDP shrinks • • “Great Recession” occurred during 2008-2009 • the recession of the last decade occurred because millions of Americans borrowed too much money, to buy houses that they couldn't afford; when the value of those houses fell they couldn't or wouldn't pay back their loans and the banks that lent them the money collapsed • recessions lead to unemployment, fear and a loss of confidence among the population • business cycle: the expansion and contraction of a nation’s economic activity that happen over a period of years, periodically and with great regularity • depression: an unusually long or deep recession High Growth Countries: • the list of countries with the largest INCREASE in GDP is likely to include countries that are extremely poor to begin with and may include countries whose previous output had been hampered by political instability, tribal or ethical clashes or in in some cases civil war • South Sudan, Sierra Leone and Paraguay (largest increase in GDP from 2012-2013) • not all high growth countries are the poorest; for the past two decades, interest has been focused on the rapid economic growth of four countries with huge populations and large GDPs: Brazil, Russia, India, and China- AKA “the BRICS” are through to represent the globe’s greatest future source of economic growth and increased prosperity GDP Per Capita: • GDP per Capita: A measure of a country’s relative wealth, calculated by dividing a country’s GDP by its population • Some of the countries with the highest GDP per capita include small countries with a small population like Luxembourg, Norway, Qatar, Macau, etc. • In a small country with a small population, a few anomalies will affect the GDP per capita far more than in a co
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