Economics 12
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Economics 12. Ms. Park. Next Presenters. Serena. Assignment: Handout #4. 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

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Economics 12

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Economics 12

Ms. Park


Next Presenters

  • Serena


Assignment: Handout #4

  • 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


Assignment: Handout #4

  • 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


Handout #3

  • Your mother buys a new car imported from Sweden

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


Textbook #5

  • 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


Capital stock

  • Page 220

  • Capital stock: the total value of assets that provide a flow of revenue

  • Net investment: gross investment – depreciation


Textbook #1c

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


Expenditure

  • Is GDP Expenditure method calculated using Net Investment or Gross Investment?

  • Expenditure approach = Consumption + Government Expenditure + Net Exports (Exports – Imports) + GROSS INVESTMNET


Inflation

  • Inflation:General increase in the prices of goods and services in an entire economy over time.

  • Deflation: General decrease in the level of prices


Q&A:

  • 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%.


CPI

  • 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.


Example

  • 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.


Q&A:

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


Q&A:

  • 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


Example

  • 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?


Q&A:

  • What would be some limitations of CPI?


Due Today

  • Textbook Question #1

  • Exit Slip:

    Christine’s income rises from $34,000 in 2012 to $35,000 in 2013. 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.


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