Chapter 2

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5 Oct 2010
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Chapter 2
The three key goals of Canadian economic system t economic growth, economic stability, full
employment
Tools to measure economic growth t aggregate output, standard of living, GDP, and productivity
Threats to economic stability t unemployment, inflation
Business cycle t pattern of short-term ups and downs (expansions, contractions) in an economy. The
four stages are peak, recession, trough, recovery. A prolonged recession is called a depression.
Aggregate output ttotal quantity of goods and services produced by an economic system during a given
period. When output grows more quickly than the population, two things usually follow: output per
capita t the quantity of goods and services per person goes up and the system provides relatively more
of the goods and services that people want.
Standard of living t }oµv]Çvµo]Ç}(P}}vÀ]Z}µvÇ[]]Ìvv
purchase with the currency used in their economic system
GDP t total value of all goods and services produced within a given period by a national economy
through domestic factors of production.
GNP t gross national product, total value of all goods and services produced by a national economy
within a given period regardless of where the factors of production are located (i.e profits earned
abroad are included)
GPI t genuine progress indicator treats activities that harm the environment as negative values
The real growth rate of GDP t adjusted for inflation and changes in the value of currency.
GDP per capita t Total GDP divided by total population
Real GDP t GDP that has been adjusted for changes in currency and price changes
Nominal GDP is measured in current dollars or with all components valued at current price.
Purchasing power parity t principle that exchange rates are set so that the prices of similar products in
different countries are about the same.
Productivity t measure of economic growth that compares how much a system produces with the
resources needed to produce it
Balance of trade t the total of a country[Æ}~o}}Z}µv]u]vµ]]u}~µZ
from other countries)
National debt t the total amount of money that the government owes its creditors
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