Textbook Notes (280,000)
CA (170,000)
York (10,000)
ECON (800)
ECON 1010 (200)
Chapter 20

ECON 1010 Chapter Notes - Chapter 20: Final Good, Capital Good, Time Series


Department
Economics
Course Code
ECON 1010
Professor
Simin Seury
Chapter
20

This preview shows pages 1-3. to view the full 15 pages of the document.
Gross%Domestic%Product
GDP%Defined
!"#$%&$Gross%Domestic%Product%,%'($)*+$,-&.+)$/-01+$%2$)*+$2'3-0$4%%5($
-35$(+&/'6+($7&%516+5$8')*'3$-$6%13)&9$'3$-$4'/+3$7+&'%5$%2$)',+
:*'($5+2'3')'%3$*-($2%1&$7-&)(;
Market%Value
!"#$/-01+($')+,($-)$)*+'&$market'value' <)*+$7&'6+($-)$8*'6*$
')+,($-&+$)&-5+5$'3$)*+$,-&.+)(
=
>2$)*+$7&'6+$%2$-3$-770+$'($?@$6+3)($)*+3$)*+$,-&.+)$/-01+$%2$A@$
-770+($'($BAC$'2$)*+$7&'6+$%2$-3$%&-34+$'($D@$6+3)($)*+3$,-&.+)$
/-01+$%2$?@@$%&-34+($'($BD@
=
E9$1('34$,-&.+)$7&'6+($)%$/-01+$7&%516)'%3C$8+$6-3$-55$)*+$
7&'6+($%2$-770+($-35$%&-34+($)%$4+)$)*+$,-&.+)$/-01+$7&'6+($%2$
A@$-770+($-35$?@@$%&-34+($F$BDA
=
§
:%$6-0610-)+$ !"#C$8+$/-01+$)*+$final'goods'and'services'
produced'
=
G$final%good%H%&$(+&/'6+I$'($-3$')+,$)*-)$'($J%14*)$J9$')($2'3-0$
1(+&$51&'34$-$(7+6'2'+5$7+&'%5$%2$)',+
>)$6%3)&-()($8')*$-3$intermediate%good%8*'6*$'($-3$')+,$
)*-)$'($7&%516+5$J9$%3+$2'&,C$J%14*)$J9$-3%)*+&$2'&,C$
-35$1(+5$-($-$6%,7%3+3)$%2$-$2'3-0$4%%5$%&$(+&/'6+
®
For%example:%-$3+8$K%&5$)&16.$'($-$2'3-0$4%%5C$J1)$)*+$
K'&+()%3+$)'&+($%3$)*-)$)&16.$'($-3$'3)+&,+5'-)+$4%%5
>2$8+$8+&+$)%$-55$)*+$/-01+$%2$'3)+&,+5'-)+$4%%5($
8')*$2'3-0$4%%5($)*+3$8+$8%105$6%13)$)*+$(-,+$
)*'34$,-39$)',+($<double%counting%
:*+$/-01+$%2$)*+$)&16.$-0&+-59$'36015+($)*+$/-01+$
%2$)*+$)'&+(
®
L%,+$4%%5($6-3$J+$/-01+5$-($'3)+&,+5'-)+$4%%5$(%,+$
5-9(C$-35$%)*+&$5-9($6-3$J+$/-01+5$-($-$2'3-0$4%%5M
®
For%example:%)*+$'6+$6&+-,$)*-)$9%1$J19$%3$-$*%)$
(1,,+&$5-9$'($-$2'3-0$4%%5C$J1)$)*+$'6+$6&+-,$)*-)$-$
&+()-1&-3)$J19($-35$1(+($)%$,-.+$L135-9($8')*$'($-3$
'3)+&,+5'-)+$4%%5
®
L%,+$4%%5($)*-)$7+%70+$J19$-&+$3+')*+&$2'3-0$%&$
'3)+&,+5'-)+$4%%5$-35$-&+$3%)$6%13)+5$-($!"#
NO-,70+($%2$(16*$'36015+P$2'3-36'-0$-((+)(C$()%6.($
-35$J%35(C$-35$(+6%35$*-35$4%%5(
L+6%35$*-35$4%%5($-&+$6%13)+5$-($!"#$'3$
)*+$9+-&$')$8-($2'&()$7&%516+5$C$3%)$)*+$9+-&$
')$*-5$J++3$&+(%05
}
®
=
§
Produced%within%a%country
Q309$4%%5($-35$(+&/'6+($)*-)$-&+$7&%516+5$8')*'3$)*+$6%13)&9$
-&+$6%13)+5$-($)*-)$6%13)&9R($!"#
For%example:%G$S-3-5'-3$2'&,$)*-)$7&%516+($(*'&)($'3$
:-'8-3C$-35$)*+$,-&.+)$/-01+$%2$)*%(+$(*'&)($-&+$
'36015+5$'3$:-'8-3R($!"#C$3%)$7-&)$%2$S-3-5-
®
=
§
In%a%given%period%of%time
!"#$,+-(1&+($)*+$/-01+$%2$7&%516)'%3$'($-$given'period'of'
time'<3%&,-009$+')*+&$-$T1-&)+&$%2$-$9+-&$<6-00+5$)*+$
quarterly%GDP%data <%&$-$9+-&C$6-00+5$)*+$annual%GDP%data
=
!"#$,+-(1&+($3%)$%309$)*+$/-01+$%2$)%)-0$7&%516)'%3$J1)$-0(%$
)%)-0$'36%,+$-35$)%)-0$+O7+35')1&+
=
:*+$+T1-0')9$J+)8++3$)*+$/-01+$%2$)%)-0$7&%516)'%3$-35$)%)-0$
'36%,+$'($',7%&)-3)$J+6-1(+$')$(*%8($)*+$5'&+6)$0'3.$J+)8++3$
7&%516)'/')9$-35$0'/'34$()-35-&5(
=
Q1&$()-35-&5$%2$0'/'34$&'(+($8*+3$%1&$'36%,+($&'(+C$8+$6-3$
-22%&5$)%$J19$,%&+$4%%5($-35$(+&/'6+(C$J1)$8+$,1()$7&%516+$
,%&+$4%%5($-35$(+&/'6+($'2$8+$-&+$-J0+$)%$J19$,%&+$%2$)*+,
=
U'('34$'36%,+($-35$&'('34$/-01+$%2$7&%516)'%3$4%$)%4+)*+&
:*+9$-&+$)8%$-(7+6)($%2$)*+$(-,+$7*+3%,+3%3P$
'36&+-('34$7&%516)'/')9
®
=
§
-
GDP%and%the%Circular%flow%of%Expenditure%and%Income
:*+$+6%3%,9$6%3('()($%2$*%1(+*%05(C$2'&,(C$4%/+&3,+3)($-35$)*+$&+()$%2$
)*+$8%&05$8*'6*$)&-5+$'3$2-6)%&$,-&.+)($-35$4%%5($H-35$(+&/'6+(I$,-&.+)(
Households
V%1(+*%05($(+00$-35$2'&,($J19$)*+$(+&/'6+($%2$0-J%1&C$6-7')-0$-35$
0-35$'3$2-6)%&$,-&.+)(
§
K%&$)*+(+$2-6)%&$(+&/'6+(C$2'&,($7-9$'36%,+$)%$*%1(+*%05(P$8-4+($
2%&$0-J%1&$(+&/'6+(C$'3)+&+()$2%&$)*+$1(+$%2$6-7')-0$-35$&+3)$2%&$)*+$
1(+$%2$0-35
§
G$2%1&)*$2-6)%&$%2$7&%516)'%3C$+3)&+7&+3+1&(*'7$&+6+'/+($7&%2')
§
K'&,($&+)-'3+5$+-&3'34($<7&%2')($-&+$3%)$5'()&'J1)+5$)%$*%1(+*%05($<
-&+$-7-&)$%2$)*+$*%1(+*%05$(+6)%&R($'36%,+
§
W%1$6-3$)*'3.$%2$&+)-'3+5$+-&3'34($-($J+'34$'36%,+$)*-)$*%1(+*%05($
(-/+$-35$0+35$J-6.$)%$2'&,(
§
K'&,($(+00$-35$*%1(+*%05($J19$6%3(1,+&$4%%5($-35$(+&/'6+($'3$)*+$
4%%5($,-&.+)
:*+$)%)-0$7-9,+3)$2%&$)*+(+$4%%5($-35$(+&/'6+($'($
consumption%expenditure%
=
§
K'&,($J19$-35$(+00$3+8$6-7')-0$+T1'7,+3)$$'3$)*+$4%%5($,-&.+)(
§
X*+3$-$2'&,$-55($13(%05$%1)71)$)%$'3/+3)%&9C$8+$6-3$)*'3.$%2$)*+$
2'&,$-($J19'34$4%%5($2&%,$')(+02
:*+$71&6*-(+$%2$3+8$70-3)C$+T1'7,+3)$-35$J1'05'34($-35$)*+$
-55')'%3($)%$'3/+3)%&'+($-&+$6-00+5$ investments
=
§
Governments
!%/+&3,+3)($J19$4%%5($-35$(+&/'6+($2&%,$2'&,($-35$)*+'&$
+O7+35')1&+$%3$4%%5($-35$(+&/'6+($'($6-00+5$government%
expenditure.
§
!%/+&3,+3)($2'3-36+$)*+'&$+O7+35')1&+$8')*$)-O+(C$J1)$)-O+($-&+$
3%)$7-&)$%2$)*+$S'&610-&$20%8$%2$+O7+35')1&+$-35$'36%,+
§
!%/+&3,+3)($-0(%$,-.+$2'3-36'-0$)&-3(2+&($)%$*%1(+*%05(C$(16*$-($
(%6'-0$(+61&')9$J+3+2')($-35$7-9$(1J('5'+($)%$2'&,(
§
:*+(+$2'3-36'-0$)&-3(2+&(C$0'.+$)-O+(C$-&+$3%)$7-&)$%2$)*+$6'&610-&$20%8$
%2$+O7+35')1&+$-35$'36%,+
§
Rest%of%the%World
K'&,($'3$S-3-5-$(+00$4%%5($-35$(+&/'6+($)%$)*+$&+()$%2$)*+$8%&05$<
exports%--35$J19$4%%5($-35$(+&/'6+($2&%,$)*+$&+()$%2$)*+$8%&05$<
imports%
§
:*+$/-01+$%2$+O7%&)($HYI$,'31($)*+$/-01+$%2$',7%&)($HZI$'($6-00+5$net%
exports%H[YI
§
>2$3+)$+O7%&)($-&+$7%(')'/+C$)*+$3+)$20%8$%2$4%%5($-35$(+&/'6+($'($
2&%,$S-3-5'-3$2'&,($)%$)*+$&+()$%2$)*+$8%&05
§
>2$3+)$+O7%&)($-&+$3+4-)'/+C$)*+$3+)$20%8$%2$4%%5($-35$(+&/'6+($'($
2&%,$)*+$&+()$%2$)*+$8%&05$)%$S-3-5'-3$2'&,(
§
-
GDP%Equals%Expenditure%Equals%Income
!&%(($5%,+()'6$7&%516)$6-3$J+$,+-(1&+5$'3$)8%$8-9(P
E9$)*+$)%)-0$+O7+35')1&+$%3$4%%5($-35$(+&/'6+(
§
E9$)*+$)%)-0$'36%,+$+-&3+5$7&%516'34$4%%5($-35$(+&/'6+(
§
:*+$)%)-0$+O7+35')1&+$<aggregate%expenditure%+T1-0($6%3(1,7)'%3$
+O7+35')1&+$701($'3/+(),+3)$701($4%/+&3,+3)$+O7+35')1&+$701($3+)$
+O7%&)(
Aggregate%Income%'($+T1-0$)%$)*+$)%)-0$-,%13)$7-'5$2%&$)*+$(+&/'6+($%2$)*+$
2-6)%&($%2$7&%516)'%3$1(+5$)%$7&%516+$2'3-0$4%%5($-35$(+&/'6+($<8-4+(C$
'3)+&+()C$&+3)$-35$7&%2')
E+6-1(+$2'&,($7-9($%1)$-($'36%,+($H'36015'34$&+)-'3+5$7&%2')(I$+/+&9)*'34$
)*+9$&+6+'/+$2&%,$)*+$(-0+$%2$)*+'&$%1)71)C$-44&+4-)+$'36%,+C$+T1-0($
-44&+4-)+$+O7+35')1&+C$)*-)$'(
W$F$S$\$>$\$!$\$Y$< Z
§
E+6-1(+$-44&+4-)+$+O7+35')1&+$+T1-0($-44&+4-)+$'36%,+C$)*+$)8%$
,+)*%5($%2$,+-(1&'34$!"#$4'/+$)*+$(-,+$-3(8+&
!"#$F$-44&+4-)+$+O7+35')1&+$-35$F$-44&+4-)+$'36%,+
§
-
Why%is%domestic%product%'gross'
R!&%((R$,+-3($J+2%&+$(1J)&-6)'34$)*+$5+7&+6'-)'%3$%2$6-7')-0M$
:*+$%77%(')+$%2$4&%(($'($R3+)RC$8*'6*$,+-3($-2)+&$(1J)&-6)'34$)*+$
5+7&+6'-)'%3$%2$6-7')-0
§
Depreciation%'($)*+$5+6&+-(+$'3$/-01+$%2$2'&,R($6-7')-0$)*-)$&+(10)($2&%,$
8+-&$-35$)+-&$-35$%J(%0+(6+36+
:*+$)%)-0$-,%13)$(7+3)$J%)*$J19'34$3+8$6-7')-0$-35$&+70-6'34$
5+7&+6'-)+5$6-7')-0$'($6-00+5$gross%investment
Net%investment%F$4&%(($'3/+(),+3)$<5+7&+6'-)'%3
§
Gross%Investment%'($%3+$%2$)*+$+O7+35')1&+($'3$)*+$+O7+35')1&+$-77&%-6*$
)%$,+-(1&'34$!"#C$(%$)*+$&+(10)'34$/-01+$%2$)%)-0$7&%516)$'($4&%(($,+-(1&+
Gross%Profit%,%8*'6*$'($-$2'&,($7&%2')$J+2%&+$(1J)&-6)'34$5+7&+6'-)'%3C$'($
%3+$%2$)*+$'36%,+($'36015+5$'3$)*+$'36%,+$-77&%-6*$)%$,+-(1&'34$!"#M
L%$-4-'3$)*+$&+(10)'34$/-01+$%2$)%)-0$7&%516)$'($-$4&%(($,+-(1&+
§
-
Measuring%Canada's%GDP
The%Expenditure%Approach
The'expenditure'approach ,+-(1&+($!"#$-($)*+$(1,$%2$6%3(1,7)'%3$
+O7+35')1&+$SC$'3/+(),+3)$>$C$4%/+&3,+3)$NO7+35')1&+$%3$4%%5($-35$
(+&/'6+($!C$-35$3+)$+O7%&)($%2$4%%5($-35$(+&/'6+($HY<ZI
Consumption%Expenditure%'($)*+$+O7+35')1&+$J9$S-3-5'-3$
V%1(+*%05($%3$4%%5($-35$(+&/'6+($7&%516+5$'3$S-3-5-$-35$'3$)*+$
&+()$%2$)*+$8%&05
"%+($3%)$'36015+$71&6*-(+$%*$3+8$*%,+(C$()-)'()'6($S-3-5-$
0-J+0($)*+$71&6*-(+$%2$3+8$*%,+($-($'3/+(),+3)
=
§
Investment''($)*+$+O7+35')1&+$%3$6-7')-0$+T1'7,+3)$-35$J1'05'34($
J9$2'&,($-35$)*+$-55')'%3($)%$J1('3+(($'3/+3)%&'+(
G0(%$'36015+($)*+$+O7+35')1&+$%3$3+8$*%,+($J9$*%1(+*%05(=
§
Government%Expenditure%on%Goods%and%Services%'($)*+$+O7+35')1&+$
J9$-00$0+/+0($%2$4%/+&3,+3)$%3$4%%5($-35$(+&/'6+(C$(16*$-($3-)'%3-0$
5+2+36+$-35$4-&J-4+$6%00+6)'%3
"%+($3%)$'36015+$transfer'payments'C$(16*$-($13+,70%9,+3)$
J+3+2')($J+6-1(+$)*+9$-&+$3%)$+O7+35')1&+($%3$4%%5($-35$
(+&/'6+(
=
§
Net%Exports%of%goods%and%services%-&+$)*+$/-01+$%2$+O7%&)($,'31($
)*+$/-01+$%2$',7%&)(
§
!"#$F$S$\$>$\$!$\$HY<ZI
-
The%Income%Approach
:*+$income%approach%,+-(1&+$!"#$J9$(1,,'34$)*+$'36%,+($)*-)$2'&,($
7-9$*%1(+*%05($2%&$)*+$2-6)%&($%2$7&%516)'%3$)*+9$*'&+$<8-4+($2%&$0-J%1&C$
'3)+&+()$2%&$6-7')-0C$&+3)$2%&$0-35C$-35$7&%2')$2%&$+3)&+7&+3+1&(*'7
X+$5'/'5+$)*+$'36%,+($'3$)*+$National'income'and'Expenditure'Accounts'
'3)%$)8%$J&%-5$6-)+4%&'+(
X-4+(C$(-0-&'+(C$-35$(1770+,+3)-&9$0-J%1&$'36%,+?M
Q)*+&$2-6)%&$'36%,+(DM
Wages,%salaries%and%supplementary%labour%income
>($)*+$7-9,+3)$2%&$0-J%1&$(+&/'6+(M
§
>36015+($4&%(($8-4+($701($J+3+2')(C$(16*$-($7+3('%3$6%3)&'J1)'%3(
§
Other%Factor%Incomes
>36015+$6%&7%&-)+$7&%2')(C$'3)+&+()C$2-&,+&($'36%,+$-35$'36%,+$
2&%,$3%3<2-&,$13'36%&7%&-)+5$J1('3+((+(
§
:*+(+$'36%,+($-&+$-$,'O)1&+$%2$'3)+&+()C$&+3)$-35$7&%2')$-35$
'36015+($(%,+$0-J%&$'36%,+$2&%,$(+02<+,70%9,+3)
§
Indirect%Tax
>($-$)-O$7-'5$J9$6%3(1,+&($8*+3$)*+9$J19$4%%5($-35$(+&/'6+(C$'3$
6%3)&-()$-$5'&+6)$)-O$'($-$)-O$%3$'36%,+
§
>35'&+6)$)-O$,-.+($)*+$,-&.+)$7&'6+$+O6++5$2-6)%&$6%()
§
Subsidy
G$(1J('59$'($-$7-9,+3)$J9$)*+$4%/+&3,+3)$)%$-$7&%516+&M
§
X')*$-$(1J('59C$2-6)%&$6%()$+O6++5($,-&.+)$7&'6+C$8+$-55$'35'&+6)$
)-O+($-35$(1J)&-6)$(1J('5'+(M
§
Z-.'34$)*'($-5]1(),+3)$J&'34($1($)%$net%domestic%income%at%market%
prices%
§
X+$()'00$,1()$4+)$2&%,$-$3+)$)%$-$4&%(($,+-(1&+M$:%)-0$+O7+35')1&+$'($-$
4&%(($31,J+&$J+6-1(+$')$'36015+($4&%(($'3/+(),+3)
[+)$5%,+()'6$'36%,+$-)$,-&.+)$7&'6+($'($-$3+)$'36%,+$,+-(1&+$J+6-1(+$
6%&7%&-)+$7&%2')($-&+$,+-(1&+5$after'deducting'depreciation'<)*+9$-&+$-$
3+)$'36%,+$,+-(1&+
:%$4+)$2&%,$3+)$'36%,+$)%$4&%(($'36%,+$8+$,1()$-55$5+7&+6'-)'%3
X+$*-/+$3%$-&&'/+5$)%$!"#$1('34$)*+$'36%,+$-77&%-6*
§
:*'($31,J+&$'($3%)$+O-6)09$)*+$(-,+$-($!"#$1('34$)*+$+O7+35')1&+$
-77&%-6*C$)*+$4-7$J+)8++3$)*+$)8%$5'22+&+3)$!"#$6-0610-)'%3($'($6-00+5$
statistical%discrepancy%%-35$'($6-0610-)+5$ -($!"#$+O7+35')1&+$<!"#$
'36%,+$)%)-0
"'(6&+7-369$'($3+/+&$0-&4+
§
-
Nominal%GDP%and%Real%GDP
Real%GDP%'($)*+$/-01+$%2$2'3-0$4%%5($-35$(+&/'6+($7&%516+5$'3$-$4'/+3$9+-&$
8*+3$valued'at'the'prices'of'a'reference'base'year'
E9$6%,7-&'34$)*+$/-01+$%2$7&%516)'%3$'3$)*+$)8%$9+-&$-)$)*+$(-,+$
7&'6+(C$8+$&+/+-0($)*+$6*-34+$'3$7&%516)'%3
§
S1&&+3)09$)*+$&+2+&+36+$J-(+$9+-&$'($D@@^$-35$8+$5+(6&'J+$&+-0$!"#$
-($,+-(1&+5$'3$D@@^$5%00-&($$<'3$)+&,($%2$8*-)$)*+$5%00-&$8%105$J19$
'3$D@@^
§
Nominal%GDP%'($)*+$/-01+$%2$2'3-0$4%%5($-35$(+&/'6+($7&%516+5$'3$-$4'/+3$
9+-&$8*+3$/-01+5$-)$)*+$7&'6+($%2$)*-)$9+-&
[%,'3-0$!"#$'($]1()$-$,%&+$7&+6'(+$3-,+$2%&$!"#
§
-
Calculating%Real%GDP%-471
Example:%8+00$6-0610-)+$&+-0$!"#$2%&$-3$+6%3%,9$)*-)$7&%516+($%3+$
6%3(1,7)'%3$4%%5C$%3+$6-7')-0$4%%5$-35$%3+$4%/+&3,+3)$+O7+3(+M$[+)$
NO7%&)($-&+$_+&%
:-J0+$D@M`$(*%8($)*+$T1-3)')'+($7&%516+5$-35$)*+$7&'6+($'3$D@@^$H)*+$J-(+$
9+-&I$-35$'3$D@?a
>3$7-&)$GIC$8+$6-0610-)+$[%,'3-0$!"#$'3$D@@^
K%&$+-6*$')+,$8+$,10)'709$T1-3)')9$7&%516+5$'3$D@@^$J9$')$7&'6+$'3$
D@@^$)%$2'35$)*+$)%)-0$+O7+35')1&+$%3$)*+$')+,
§
X+$)*+3$(1,$)*+$)%)-0$+O7+35')1&+($2&%,$+-6*$')+,$'3$D@@^$)%$2'35$
3%,'3-0$!"#C$8*'6*$'3$D@@^$'($B?@@$,'00'%3
§
E+6-1(+$D@@^$'($)*+$J-(+$9+-&C$J%)*$3%,'3-0$-35$&+-0$ !"#$+T1-0$
B?@@$,'00'%3
§
>3$7-&)$EI$8+$6-0610-)+$3%,'3-0$!"#$'3$D@?a$8*'6*$8-($B`@@$,'00'%3
Z10)'709$D@?a$T1-3)')9$7&%516+5$J9$D@?a$7&'6+($)%$2'35$)%)-0$
+O7+35')1&+$%2$-$4'/+3$4%%5$'3$D@?a
§
X+$)*+3$(1,$17$)*+$)%)-0$+O7+35')1&+($%2$)*+$4'/+3$')+,($2%&,$
D@?a$)%$2'35$3%,'3-0$!"#$%2$D@?a
§
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Gross%Domestic%Product
GDP%Defined
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Market%Value
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Final%Goods%and%Services
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For%example:%-$3+8$K%&5$)&16.$'($-$2'3-0$4%%5C$J1)$)*+$
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Produced%within%a%country
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In%a%given%period%of%time
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GDP%and%the%Circular%flow%of%Expenditure%and%Income
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Governments
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Rest%of%the%World
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GDP%Equals%Expenditure%Equals%Income
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Why%is%domestic%product%'gross'
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Measuring%Canada's%GDP
The%Expenditure%Approach
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Nominal%GDP%and%Real%GDP
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GDP%Defined
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