1. Economic Activity Television
EAT
Economic Activity Television
Catherine McGoveran
Stephanie Milligan
Carolyn Pollard
Stephanie Woods
Rebecca Young

2. EAT Today’s Program Economic Activity Television
Gross Domestic Product (GDP)
Components of GDP
Per capita GDP
Limitations of GDP
Other economic measures

3. Reporter Stephanie Milligan
Breaking News!
Reporter
Stephanie Milligan

4. National Income Accounts
Definition: accounts showing levels of total income and spending in the Canadian economy

5. National Income Accounts
Similar to how a business tracks revenues and expenditures
Performance of the Canadian economy can be analyzed and compared to other nation’s economies by using national income accounts

6. GDP
Definition: the total dollar value at current prices of all final goods and services produced in Canada in a given period
Dollar value is calculated at current prices, typically once a year

7. How To Calculate GDP
Income Approach: a method of calculating GDP by adding together all incomes in the economy
Expenditure Approach: a method of calculating GDP by adding together all spending in the economy

8. GDP Identity GDP expressed as total income =
GDP expressed as total spending
Both of these expressions are identical
Either method can be used

9. The Daily Weather Report
With Rebecca
Young

10. Satellite Image of Canada
Weather Break
Satellite Image of Canada

11. Cloudy with sunny breaks
Long-term Forecast
Mon Tues Wed Thurs Fri Sat.
HIGH  
4°C
3°C
5°C
7°C
LOW   -
-2°C
-3°C
1°C
CONDITION  
Rain or snow
Cloudy periods
Variable cloudiness
Light rain
Cloudy with sunny breaks
P.O.P.  
60%
10%
20%
90%
WIND  
W 15 km/h
SW 20 km/h
SW 15 km/h
S 15 km/h
NW 15 km/h
W 10 km/h

12. Special Report on the “Approach”
With Carolyn
Pollard

13. The Income Approach
The income approach is made up of components for calculating GDP
Wages
Rent
Profit
Interest

14. The Income Approach
Stats Canada added three other classifications used for calculating GDP
Indirect taxes
Depreciation
Statistical Discrepancy Account
Balance GDP found through income approach with GDP found through expenditure approach

15. GDP is the sum of the seven groups
The Income Approach
Therefore
GDP is the sum of the seven groups

16. The Expenditure Approach
Categories of Products
Final Products: products that will not be processed further and will not be resold
Intermediate Products: products that will be processed further or will be resold

17. The Expenditure Approach
Be Careful!!
Double Counting: adding the same item to GDP at different stages in its production ↓
Causes estimates of GDP to be too
high

18. The Expenditure Approach
Value Added: the extra worth of a product at each stage in its production ↓
Used to avoid double counting
Stats Canada subtracts the value of all intermediate goods/services from the value of the products at the next intermediate and final stages

19. The Expenditure Approach
Categories of Purchases
Excluded Purchases: categories excluded because they are not related to current production
Financial Exchanges
Second-Hand Purchases

20. The Expenditure Approach
The Categories of Purchases (cont’d)
Included Purchases: categories that are used in GDP calculations
Personal Consumption (C)
Gross Investment (I)
Government Purchases (G)
Net Exports (X-M)

21. The Expenditure Approach
FORMULA!
Expenditure Equation
GDP = C + I + G + (X – M)

22. Questions?

23. Personal Consumption
Definition: household spending on goods and services, which is the largest portion of the GDP
Nondurable Goods: goods that are
consumed just once (Food)
Durable Goods: goods that are consumed
repeatedly over time (CDs)

24. Gross Investment
Definition: purchases of assets that are intended to produce revenue
It can vary from about 15%-25% from year to year
Most important spending is on equipment and machines

25. Inventories Definition: stocks of unsold goods and materials
businesses use inventories of input to avoid stopping production due to unexpected demand, and are viewed as income-producing assets
↑ inventories in a year = positive investment spending
↓ inventories in a year = negative investment spending
Construction of all buildings is part of gross investment

26. Capital Stock Net Investment
Definition: the total value of productive assets, such as machinery and equipment that provide a flow of revenue
Net Investment
Definition: gross investment minus depreciation, representing the yearly change in the economy’s stock capital

27. Government Purchases
Definition: Current government spending on goods and services
Makes up about 20% of GDP
Government spending uses taxes from households and businesses for finances
Examples
Road Repairs
Buying battleships for
armed forces

28. Government Purchases Government spending NOT included in:
Government transfer payments to households
Subsidies to businesses
Expenditures by government-owned companies

29. Net Exports Exports: Canadian purchases of goods and services
(by foreigners)
Imports: Canadian purchases of foreign
goods and services

30. Net Exports Net Exports: exports minus imports Formula! ( X – M )
Small portion of GDP
Exports/Imports separately count for 25%
Foreign involvement creates a net increase
Formula!
( X – M )

31. Expert Opinion

32. GDP and Living Standards
Per Capita GDP: GDP per person, calculated as GDP divided by population
GDP
____________________

33. Adjustments to Per Capita GDP
Inflation Adjustments
When making comparisons about economic well being – per capita GDP must be adjusted
This compensates for price changes over the years

34. Adjustments to Per Capita GDP
Inflation Adjustments
Real GDP: GDP expressed in constant dollars from a given year
Per Capita Real GDP: GDP per person, expressed in constant dollars from a given year

35. Adjustments to Per Capita GDP
Inflation Adjustments
Formula!
Per capita real GDP = Real GDP
Population

36. Adjustments to Per Capita GDP
Exchange-Rate Adjustments
Different currencies must be adjusted when comparing the GDP of different countries

37. Adjustments to Per Capita GDP
Limitations of GDP
GDP has qualitative and quantitative limitations
Excluded Activities
Product Quality
Composition of Output
Income Distribution
Leisure
The Environment

38. Interview
With Hazel
Henderson

39. Hazel Henderson
Thinking
Globally

40. Viewers Emails Dear Economic Activity Television,
I love your show. It is so informative and entertaining. I watch it every day. I have some things that have been troubling me though. Could you explain some other economic measures please. Thank you so much!!
Submit your questions at or
us at

41. Other Economic Measures
National income accounts are used by Stats Canada to calculate measures that indicate economic activity
Gross National Product (GNP)
Net Domestic Product (NDI)
Personal Income
Disposable and Discretionary Income

42. Gross National Product
Definition: the total income acquired by Canadians both within Canada and elsewhere
GDP – concentrates on incomes in Canada
VS.
GNP – concentrates on incomes of Canadians

43. Gross National Product
Two adjustments made to GDP to calculate GNP
Income earned from Canadian investments by foreigners is deducted from GDP
Income earned from foreign investments by Canadians is added to GDP
Formula!
GNP = GDP – Net investment income to foreigners

44. Net Domestic Income
Definition: the total income earned by Canada’s households
Formula!
NDI = GDP – amounts that are not earnings from
current production

45. Personal Income Definition: the income actually received by households
Adjustments must be made to NDI to calculate personal income
Transfer payments
Other payments to persons
Earnings not paid out to persons
Net investment income to foreigners

46. Disposable and Discretionary Income
Disposable Income: household income minus personal taxes and other personal transfers to government
Discretionary Income: disposable income minus purchases of necessities

47. EAT
Economic Activity Television
Thank You For
Tuning In!

48. Homework!