Ms. Park

 Serena

 Consumption expenditures = $600  Exports = $75  Government purchases of goods and services= $200  Construction of new homes = $100  Imports = $50  Beginning of year inventory = $100  End of year inventory = $125  Business fixed investment = $100  Government payments to retirees = $100  Household purchases of durable goods = $100

 Consumption expenditures = $600  Exports = $75  Government purchases of goods and services= $200  Construction of new homes = $100  Imports = $50  Beginning of year inventory = $100  End of year inventory = $125  Business fixed investment = $100  Government payments to retirees = $100  Household purchases of durable goods = $100

 Your mother buys a new car imported from Sweden  Your mother’s car rental business buys a new car imported fro Sweden

 A student is paid for shovelling a neighbour’s sidewalk  Unemployed carpenter receives an employment insurance payment  A wealth-holder sells 1000 shares issued by a Canadian corporation

 Page 220  Capital stock: the total value of assets that provide a flow of revenue  Net investment: gross investment – depreciation

Q: How much is Metrica's capital stock expanding or contracting in 2001?  Look at depreciation ($79 billion)  Look at gross investment ($157 billion)  Metrica is investing $157 billion BUT $79 billions are lost in repairing or replacing durable assets  Net investment = $157 billion - $79 billion = $78 billion

 Is GDP Expenditure method calculated using Net Investment or Gross Investment?  Expenditure approach = Consumption + Government Expenditure + Net Exports (Exports – Imports) + GROSS INVESTMNET

 Inflation: General increase in the prices of goods and services in an entire economy over time.  Deflation: General decrease in the level of prices

 If Canada has an annual inflation rate of 3%, are all the prices rising?  Inflation does not mean all the prices are rising. Some prices are rising, while other prices constant or even decrease. It is that OVERALL prices are rising in 3%.

 Consumer Price Index (CPI): a measure of price changes for a typical “shopping basket” of consumer products.  To determine what typical Canadian households buy, Statistics Canada surveys consumers’ buying habits every few years.

 Suppose the shopping basket includes only two items: pizzas and colas. Survey in 2000 shows that, each month, an average consumer buys 20 hamburgers at $2 each, and 20 bottles of Cola at $1 each.

 If the CPI rose from 100 in 2010 to 115 in 2011, what is the inflation rate over the year?

 What is the difference between nominal income and real income?  Nominal income: income expressed in current dollars  Real income: income expressed in constant base-year dollars

 Real income = nominal income/ CPI in hundredths  EX. Nicole’s income rises from 40,000 to 45,000 during a year when the CPI rises from 100 to 110. If the consumer’s own monthly purchases roughly correspond to those in the representative “shopping basket,” what’s Nicole’s personal impact of inflation?

 What would be some limitations of CPI?

 Textbook Question #1  Exit Slip: Christine’s income rises from $34,000 in 2012 to $35,000 in Inflation rate over the year is 6%. a) What is Christine’s real income? b) Explain whether following statement is true or false: Since Christine’s income rose, she has a higher standard of living.