8/19/2019 3360 Unit 02.2.2 2014-I-01
1/22
ENGR 3360U Winter 2014
Unit 2.2.1
Macroeconomics: Measuring Economic Activity
Dr. J. Michael Bennett, P. Eng., PMP,
UOIT,
Version 2014-I-01
8/19/2019 3360 Unit 02.2.2 2014-I-01
2/22
Unit 2.2 Macroeconomics
2014!"!01 #r. $.M. %ennett& '.Eng.& 'M' ENGR 3360U Eng Eco2.2!2
()ange Recor*
2014!"!01 "nitia+ (reation
8/19/2019 3360 Unit 02.2.2 2014-I-01
3/22
Unit 2.2 Macroeconomics
2014!"!01 #r. $.M. %ennett& '.Eng.& 'M' ENGR 3360U Eng Eco2.2!3
2.2.2 Measuring Economic Activity
2.2.2.1 G#' Gross #omestic 'ro*uct
2.2.2.2 Measuring G#'
2.2.2.3 Nomina+ vs. Rea+ G#'
2.2.2.4 Unem,+oyment Rate
8/19/2019 3360 Unit 02.2.2 2014-I-01
4/22
Unit 2.2 Macroeconomics
2014!"!01 #r. $.M. %ennett& '.Eng.& 'M' ENGR 3360U Eng Eco2.2!4
Measuring G#' -a
Gross *omestic ,ro*uct& G#'
/ )e maret va+ue o t)e ina+ goo*s an* services ,ro*uce*
in a country *uring a given ,erio*
Using maret va+ues o *ierent goo*s an* services
A++os economists to aggregate t)e uantities o many
*ierent goo*s an* services
're*icting t)e tota+ va+ue o marete* out,ut is useu+ 5ecause:
e+,s governments to ,re*ict ta7 revenue an* e7,en*itures
)e num5er o ,ai* 8o5s in t)e economy *e,en*s on G#'
8/19/2019 3360 Unit 02.2.2 2014-I-01
5/22
Unit 2.2 Macroeconomics
2014!"!01 #r. $.M. %ennett& '.Eng.& 'M' ENGR 3360U Eng Eco2.2!9
Measuring G#' -5
ina+ goo*s or services -e.g. san*ic)
Goo*s or services consume* 5y t)e u+timate user
t)e en* ,ro*ucts o t)e ,ro*uction ,rocess
ota+ ina+ sa+es / G#'"nterme*iate goo*s or services
e.g. )eat in +our ,ro*uction;
+our in 5rea* ,ro*uction;
5rea* in san*ic) ,ro*uction/ Goo*s or services use* u, in t)e ,ro*uction o ina+ goo*s an* services&
Not se,arate+y counte* as ,art o G#'& in or*er to avoi* *ou5+e!counting
8/19/2019 3360 Unit 02.2.2 2014-I-01
6/22
Unit 2.2 Macroeconomics
2014!"!01 #r. $.M. %ennett& '.Eng.& 'M' ENGR 3360U Eng Eco2.2!6
W)at is t)e re+ations)i, 5eteen G#' an*
Economic We++!%eing<Economic out,ut = Marete* out,ut
G#' omits va+ue )ouse)o+* +a5or& va+ue o +eisure& +engt) o
+ie& etc..
G#' inc+u*es >regretta5+e e7,en*itures?
(osts o ,o++ution& crime& etc.G#' is a useu+ conce,t 5ecause:
Maret (onsum,tion is an im,ortant ,art o e++!5eing
G#' tren*s *etermine ,ai* em,+oyment
G#' tren*s *etermine ta7 revenues @ government e7,en*itures%U G#' ,er ca,ita WEBB!%E"NG
8/19/2019 3360 Unit 02.2.2 2014-I-01
7/22
Unit 2.2 Macroeconomics
2014!"!01 #r. $.M. %ennett& '.Eng.& 'M' ENGR 3360U Eng Eco2.2!C
G#' a useu+ measure& 5ecause:
"ncome ena5+es consum,tion
Many ,eo,+e ant ,ai* 8o5s
G#' grot) rate *etermines t)e rate o grot)o ,ai* em,+oyment
Governments nee* ta7 revenue to ,rovi*e
servicesG#' grot) rate )eavi+y in+uence t)e ta7
revenues an* e7,en*itures o governments
8/19/2019 3360 Unit 02.2.2 2014-I-01
8/22
Unit 2.2 Macroeconomics
2014!"!01 #r. $.M. %ennett& '.Eng.& 'M' ENGR 3360U Eng Eco2.2!D
2.2.2.2 Measuring G#'
)e #omestic in >Gross #omestic 'ro*uct?
means >,ro*uce* it)in a given country?
G#' measures economic activity it)in agiven country ! a++ ,ro*uction taing ,+ace it)in (ana*ian
5or*ers& even i ,ro*uce* in a oreign!one* ,+ant
#uring a given ,erio*; Norma++y a year
8/19/2019 3360 Unit 02.2.2 2014-I-01
9/22
Unit 2.2 Macroeconomics
2014!"!01 #r. $.M. %ennett& '.Eng.& 'M' ENGR 3360U Eng Eco2.2!
Euation or G#'
Y = C + I + G + NX
Y / gross *omestic ,ro*uct& or out,ut
C / consum,tion e7,en*iture
I / investment
G / government ,urc)ases NX / net e7,orts
8/19/2019 3360 Unit 02.2.2 2014-I-01
10/22
Unit 2.2 Macroeconomics
2014!"!01 #r. $.M. %ennett& '.Eng.& 'M' ENGR 3360U Eng Eco2.2!10
E7,en*iture (om,onents o G#'
E7,en*iture (om,onents o (ana*ian G#'&
2003 -5i++ions o *o++ars
8/19/2019 3360 Unit 02.2.2 2014-I-01
11/22
Unit 2.2 Macroeconomics
2014!"!01 #r. $.M. %ennett& '.Eng.& 'M' ENGR 3360U Eng Eco2.2!11
G#' as "ncome -5Ftatistics (ana*a actua++y 5reas *on G#' into 9 incomecategories:
Wages& sa+aries an* su,,+ementary +a5our income
Net arm an* sma++ 5usiness income -inc+u*es most
renta+ income
(or,orate ,roits 5eore ta7es
"nterest an* misce++aneous investment income
(a,ita+ consum,tion a++oances
Bast 4 categories corres,on* roug)+y to ca,ita+ income
8/19/2019 3360 Unit 02.2.2 2014-I-01
12/22
Unit 2.2 Macroeconomics
2014!"!01 #r. $.M. %ennett& '.Eng.& 'M' ENGR 3360U Eng Eco2.2!12
"ncome (om,onents o G#'
"ncome (om,onents o (ana*ian G#'&
2003 -5i++ions o *o++ars
8/19/2019 3360 Unit 02.2.2 2014-I-01
13/22
Unit 2.2 Macroeconomics
2014!"!01 #r. $.M. %ennett& '.Eng.& 'M' ENGR 3360U Eng Eco2.2!13
'utting "t A++ oget)er
G#' is t)e same amount )et)er e
measure it 5y e7,en*itures or incomes
)is is not a coinci*ence)ere is a circu+ar +o re+ations)i, 5eteen
e7,en*itures an* incomes
8/19/2019 3360 Unit 02.2.2 2014-I-01
14/22
Unit 2.2 Macroeconomics
2014!"!01 #r. $.M. %ennett& '.Eng.& 'M' ENGR 3360U Eng Eco2.2!14
2.2.2.3 Nomina+ G#' vs. Rea+ G#'
Nomina+ uses current ,rices
Rea+ uses t)e %ase ear ,rice
8/19/2019 3360 Unit 02.2.2 2014-I-01
15/22
Unit 2.2 Macroeconomics
2014!"!01 #r. $.M. %ennett& '.Eng.& 'M' ENGR 3360U Eng Eco2.2!19
G#' ! Mont)+y Economic "n*icators)tt,:HHstrategis.ic.gc.caHe,icHinternetHineas!aes.nsHenH)Ira01DDe.)tm+
8/19/2019 3360 Unit 02.2.2 2014-I-01
16/22
Unit 2.2 Macroeconomics
G#' 10!2009
2014!"!01 #r. $.M. %ennett& '.Eng.& 'M' ENGR 3360U Eng Eco2.2!16
8/19/2019 3360 Unit 02.2.2 2014-I-01
17/22
Unit 2.2 Macroeconomics
2014!"!01 #r. $.M. %ennett& '.Eng.& 'M' ENGR 3360U Eng Eco2.2!1C
G#' (om,arisons
We can com,are G#' across
#ierent +ocations
'rovince!5y!,rovince G#'
#ierent times
1C G#' to 2001 G#'
(om,aring G#' over time may 5e mis+ea*ing
%ecause o in+ation
".e.& G#' is ca+cu+ate* using maret va+ues& )ic) are
in+uence* 5y in+ation
o tae out t)e eects o in+ation& economists use a 5ase year
A ,articu+ar year e.g. 1C
i 2 2 i
8/19/2019 3360 Unit 02.2.2 2014-I-01
18/22
Unit 2.2 Macroeconomics
2014!"!01 #r. $.M. %ennett& '.Eng.& 'M' ENGR 3360U Eng Eco2.2!1D
2.2.2.4 Unem,+oyment
Fensitive in*icator o con*itions in t)e
+a5our maret
#irect in*icator o unuse* +a5our resourcesBo unem,+oyment is corre+ate* it)
$o5 security
$o5 avai+a5i+ity"m,roving ages an* oring con*itions
U i 2 2 M i
8/19/2019 3360 Unit 02.2.2 2014-I-01
19/22
Unit 2.2 Macroeconomics
2014!"!01 #r. $.M. %ennett& '.Eng.& 'M' ENGR 3360U Eng Eco2.2!1
(osts o Unem,+oyment
Unem,+oyment im,oses costs on a nation
Economic Boer incomes -5ot) earnings an* ,roits *ec+ine
"ncrease* government transer ,ayments
'syc)o+ogica+ Boss o se+!esteem& *e,ression
Focia+: Unem,+oyment /= FREFF "ncrease in crime& *ivorce& *omestic vio+ence& a+co)o+ism& *rug
a5use& etc..
Unem,+oye* ,eo,+e are MU( un)a,,ier t)an ot)ers
Em,+oye* are a+so +ess )a,,y )en unem,+oyment rises
U i 2 2 M i
8/19/2019 3360 Unit 02.2.2 2014-I-01
20/22
Unit 2.2 Macroeconomics
2014!"!01 #r. $.M. %ennett& '.Eng.& 'M' ENGR 3360U Eng Eco2.2!20
Fu,,+ementary Measures o Unem,+oyment
Jicia+ unem,+oyment rate e7c+u*es to grou,s o orers:
#iscourage* orers
'eo,+e )o say t)ey ou+* +ie to )ave a 8o5 5ut )ave
not ma*e an eort to in* one in t)e ,ast 4 ees 5ecause t)ey 5e+ieve t)at t)ere are no 8o5s to 5e )a*
"nvo+untary ,art!time orers
'eo,+e )o say t)ey ou+* +ie to or u++!time 5ut are
on+y a5+e to in* ,art!time or
Ftatistics (ana*aKs su,,+ementary unem,+oyment rates inc+u*e
t)ese grou,s
U it 2 2 M i
8/19/2019 3360 Unit 02.2.2 2014-I-01
21/22
Unit 2.2 Macroeconomics
2014!"!01 #r. $.M. %ennett& '.Eng.& 'M' ENGR 3360U Eng Eco2.2!21
Fu,,+ementary Unem,+oyment Rates
Ofcial Canadian rate plusinvoluntary part-time workers
Ofcial Canadian rateplus discouraged workers
Ofcial Canadian ratemade comparable to U.S. rate
Ofcial U.S. rate
Ofcial Canadian rate
U it 2 2 M i
8/19/2019 3360 Unit 02.2.2 2014-I-01
22/22
Unit 2.2 Macroeconomics
Recent Unem,+oyment Rates
2014 " 01 #r $ M %ennett ' Eng 'M' ENGR 3360U Eng Eco2 2 22