Economic Growth and Inflation

1. Economic Growth

Definition:_________________________________

What happens if the population grows faster than GDP?______________________

What happens if prices grow faster than production?__________________________

2. Calculating GDP

• Nominal GDP:______________________
• Real GDP: __________________________
• Practice Problem

Quantity of Pizza Price of Pizza Quantity of Calzones Price Calzones

2008 10 10 15 5

2018 20 12 30 6

- Nominal GDP for 2008:

- Nominal GDP for 2018:

- Real GDP for 2018 ( in 2008 dollars):

- Difference between Nominal GDP for 2008 and 2018:

- Change due to price:

- Change due to quantity:

3. Measuring Inflation

GDP Deflator

- Definition:_______________________________

- Formula: nominal. GDP 10

real GDP

- Practice: Calculate the GDP Deflator for the pizza/calzone example.

- What does this GDP deflator number tell you?_______________________

• Consumer Price Index

- Definition: __________________________

- Formula: cost.of.market.basket.of.goods.in.current.year 100

cost.of.market.basket.of.goods.in.base.year

-Practice: Assume that the typical consumer in the pizza/calzone economy buys 2 calzones and 2 pizzas. What is the CPI?

- What does this CPI tell you?_____________________________

GDP	Consumer Price Index

4. Calculating the Inflation Rate

• Formula: change.in.price.index 100

price.index.f or.previous.year

• Calculate the inflation rate for Canada using the CPI

Aug 2019 Aug 2020

136.8 137

• Calculate the inflation rate for Canada using the GDP Deflator

Q3 2019 Q3 2020

109.9 111.4

• Are the inflation rates the same? Why?

5. Types of Inflation

• ____________________________________________________
• ____________________________________________________

- Type 1: ____________________________________________

- Type 2: ___________________________________________

- Type 3:____________________________________________

6. Winners and losers of unanticipated inflation

Loser

Winner

7. Costs of inflation

(a)_______________________________________________________

(b)_______________________________________________________

(c)_______________________________________________________

(d)_______________________________________________________

(e)_______________________________________________________

(f)________________________________________________________

8. Fisher Effect

• Formula:
• If we anticipate more inflation then_________________________________

9. Causes of Inflation

• ___________________________________
• ___________________________________
• ___________________________________

10. Business Cycles

Parts of the business cycle:

• Recession:_______________________________
• Depression:______________________________

11. Calculating Economic Growth

Formula: increase.in.real.gdp.capita 100

real.gdp.per.capita.previous.year

2017 2018 2019

Real GDP 2,021,942,000,000 2,078,297,000,000 2,115,265,000,000

Population 36,540,268 37,058,856 37,593,384

• Economic growth from 2017 to 2018:

• Economic growth from 2018 to 2019:

• How long will it take the economy to double in size at the 2017/18 growth rate? 2018/19 growth rate?

12. Income

• Nominal income:_________________________________________
• Real income _____________________________________________
• Convert 1928 and 1933 nominal income into 2019 dollars:

Price Index Nominal Income Real Income

1928 9.1 548 ?

1933 7.1 212 ?

2019 136 45,062 45,062

References:

https://www.youtube.com/watch?v=TEtHa7M_WDs&t=782s

https://www.youtube.com/watch?v=fwuy4dQPNKA&t=354s

https://www.youtube.com/watch?v=GU2KYJo-qNY

https://www.youtube.com/watch?v=kKnLqfMcBiQ

https://www.youtube.com/watch?v=QSO8uI_8IrU

https://www.youtube.com/watch?v=aGKJ5NgVvPQ&feature=emb_title

https://www.youtube.com/watch?v=C7YWXqjJ1CE&feature=emb_title

https://www.youtube.com/watch?v=d9RAIiuX7g8

https://www.youtube.com/watch?v=1ryqglMNfGE

https://www.youtube.com/watch?v=_wGqYtRwNmc

https://www.bbc.com/news/business-45523636

https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1810000701

https://www150.statcan.gc.ca/n1/daily-quotidien/210818/dq210818a-eng.htm?HPA=1&indid=3665-1&indgeo=0

https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1410020801&pickMembers%5B0%5D=1.1&pickMembers%5B1%5D=2.1