【正文】 Quantity 10 10 5 10 TOTALS 76 calculating GDP at base year prices YEAR 2021 Pizza Beer Movie Cover Charge Price 2021 Quantity 15 15 5 10 TOTALS 165 120 77 calculating GDP at base year prices YEAR 2021 Pizza Beer Movie Cover Charge Price 2021 Quantity 15 15 5 10 TOTALS 143 120 25 100 78 calculating GDP at base year prices YEAR Nominal GDP Real GDP GDP Deflator 2021 2021 79 The GDP Deflator This information allows us to calculate a special price index – the GDP Price Deflator, which can be used to measure the extent to which prices have changed from year to year. This is more straightforward than the chain weighted price index noted above. GDP Deflator for 2021 = Nominal GDP 2021 X 100 Real GDP 2021 80 Main Points 1. Definition of GDP 2. How it is measured – Expenditure Approach – Value Added Approach – Ine Approach 3. Nominal vs. Real GDP – Price Indices Sidebar – GDP deflator – Shortings of GDP – As a measure of output – As a measure of wellbeing 81 Problems with the GDP The GDP has several shortings, both (1)As a measure of total output (2)As a measure of wellbeing 82 Shortings of GDP ? Remember : GDP began in WWII as a measure of wartime production capacity. ? Widely used by policy makers, economists, etc. as a measure of a nations? economic health and wellbeing ? Was never intended for this role. ? Simply adds up the products and services bought and sold – does not distinguish between activities that are beneficial and activities that are destructive. 83 Shortings of GDP as a Measure of Total Output ? Measurement Shortings ? Nonmarket transactions ? The underground economy ? Leisure ? Does not capture improved Product Quality 84 Shortings of GDP as a Measure of Total Output (1)Nonmarket transactions (money is not exchanged) ? Paint own house vs. hire a pany. Product same, but GDP higher in second instance. ? Volunteer work is not counted ? Childcare, eldercare ? Barter transactions ? GDP undervaluation higher in countries where there is large amounts of activity that is nonmarket. 85 (2)Underground Economy (exchanges are not registered) ? Illegal production/services ? Estimated at about 15% in Canada. Other countries are much higher (Greece 30%, Italy 27%, Spain and Portugal 22%) ? Tax avoidance ? Waitstaff ines, paying cash for home repairs Shortings of GDP as a Measure of Total Output 86 (3) Leisure ? In order to produce more GDP, may have to give up more leisure. ? A cost involved in raising GDP that is not being measured. ? . versus Northern Europe. Shortings of GDP as a Measure of Total Output 87 Does not capture improved Product Quality ? . a laptop puter today is not the same as a laptop puter 10, even 5 years ago. ? Improved product quality increases wellbeing, but is not captured in GDP. ? Low quality products may increase GDP – have to purchase them more often. Shortings of GDP as a Measure of Total Output 88 Shortings of GDP as a Measure of WellBeing ? In many cases, things that reduce wellbeing of a society add to the GDP…. 89 ? Natural disasters (rebuilding) ? Crime (police, security, property damage replacement, medical costs) ? Divorce (lawyer?s fees, need for two households) Shortings of GDP as a Measure of WellBeing 90 ? Social decay (prisons, drug abuse counselling) ? Depletion of natural resources – increases GDP. ? GDP increases due to polluting activities and then again due to cleanup. Shortings of GDP as a Measure of WellBeing 91 ? GDP ignores position amp。 distribution of Output ? Guns and vaccines treated equally ? Pays no attention to ine distribution Shortings of GDP as a Measure of WellBeing 92 ? GDP ignores nonmaterial sources of wellbeing ? Quality of life determined by many other things than physical goods. ? Strength of family, munity ? Freedoms, rights Shortings of GDP as a Measure of WellBeing 93 ? Human Development Index ? Weighted average of indices for life expectancy at birth, adult literacy, average years of schooling and purchasing power adjusted real GDP per capita. ? Amartya Sen – Functionings 阿馬蒂亞 森 ,生活質(zhì)量 ,98年諾獎 Shortings of GDP as a Measure of WellBeing 94 ? Final Word: ? GDP is not a perfect measure of the economy?s health – and certainly not a great measure of well being. ? But…as long as we acknowledge its limitations it is useful as a benchmark on which to pare economy across nations and within a nation over time. ? The construction of GDP provides useful information on the economy?s ponents. Shortings of GDP as a Measure of WellBein