MGTA01 – Introduction to Business – Week 6

Measuring Performance
Read Chapter 6
(to page 127)

Updated: October 24, 2021

 Measuring Performance
An economic system should produce:
• lots of things that people need and want
• more with each passing year

Next week:
lots for each citizen
doing a lot with finite factors
using all the available factors
share the benefits between all citizens
 Measures of Performance

Today { Gross Domestic Product (GDP)

to p. 127 { GDP growth

Next { GDP per capita

Week {Productivity
(Nov 2) { Employment and unemployment
{Distribution and equality
 Gross Domestic Product (GDP)
Gross = “large”
Domestic = “within the borders”
Product = “what is produced”
GDP = Total value of all goods and
services produced by an
economic system (typically,
in a year).
Gross Domestic Product (GDP)

A country with large GDP:

suggests:
many workers, using many factors,
producing many things of high value

A country with small GDP:

suggests:
fewer workers (small population), using less capital,
producing fewer things of less value
GDP = Total Economic Activity
Total global economic activity 2019
~$88 trillion

Countries with largest GDP:

USA = $21 trillion 25%
China = $14 trillion 16%
 Countries with Largest GDP - 2019
1  United States $ 21.4 trillion
2  China 14.3 trillion * *
3 Japan 5.0 trillion
4  Germany 3.8 trillion
5  India 2.87 trillion
6 United Kingdom 2.82 trillion
7 France 2.71 trillion
8 Italy 2.00 trillion
9 Brazil 1.84 trillion
10  Canada 1.74 trillion
* * measured in US dollars
Source: World Bank, http://databank.worldbank.org/data/download/GDP.pdf
 GDP Measures “Size”
According to the World Bank

16 countries GDP > $1 trillion

9 countries $500 billion - $999 billion
22 countries $250 billion - $499 billion
17 countries $100 billion - $249 billion
25 countries $50 billion - $99 billion
Countries With Largest GDP

The 20 largest economies

1960 - 2017

https://www.youtube.com/watch?v=jCNSqEwh7GQ
Provinces, States, Cities Have GDP
GDP is also calculated for
provinces, states and cities
GDP
Rank City
($US trillion)
1 Tokyo 1,617 = Canada

2 New York City 1,403 = Spain

3 Los Angeles 860.5 = Netherlands
4 Seoul 845.9
5 London 835.7
41 Toronto 276.3
= Pakistan
87 Montreal 155.9
= Ukraine
122 Vancouver 109.8
= Ecuador
GDP of Provinces - 2018
= Switzerland
= Malaysia
= Chile
= Czech Republic
= Panama
 GDP Measures Size
GDP measures an economy’s size
(size is not unimportant)

But - GDP does not measure:

Growth
Wealth
Opportunity
Distribution
 GDP Growth
An economic system should grow

Growing GDP indicates:

more workers
in more businesses
producing more goods
providing more services
…more jobs, more stuff !
Canada – GDP Growth 1960 - 2018
8.0%

7.0%
Canada’s GDP
Recently: grows roughly
Canada’s GDP 9 years
growsout ofin
10
6.0%
(roughly) 9 years out of 10, typically by
5.0%

4.0%
1-2%
3.0%

2.0%

1.0%

0.0%
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
-1.0%

-2.0%

-3.0%

-4.0%
Slow Growth / No Growth
Falling GDP indicates:
fewer people (?)
in fewer jobs (?)
more failed business (?)
fewer goods (?)
fewer services (?)
Falling GDP called “recession”
 Canada – GDP Growth
1960 - 2018
8.0%
Canada’s GDP grows roughly 9 years out of 10
7.0%

6.0%

5.0%

4.0%

3.0%

2.0%

1.0%

0.0%
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
-1.0%

-2.0% recessions
-3.0%
but not always
-4.0%
 Effect of COVID - 2020
.
 US GDP Growth 2001-2013
Economies should grow
Sometimes they don’t Recession
Effect of COVID – USA 2020
 Recession
GDP falls for 2 quarters (2 x 3 months)
GDP
growth
% cl e
s cy
busines

time
recession
 Canada – Business Cycles
Business cycle: The regular expansion and contraction of
economic activity that takes place every few years
 Canada: GDP & Pop’n Change 2007-16
GDP growth % Population change %
.
4.5
4.0 GDP (goods and ser-
vices available)
3.5
grows faster than the
3.0 population
2.5
2.0
1.5
1.0
0.5

0.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 mean
-0.5
-1.0
-1.5
 GDP Growth – Major Economies
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
15

12

9 China

6 India

3 USA

France
0

-3
 USA & China – GDP 2003-2015
18

16
..
14

12
US$
10
trillion
8 Chin
6
a
4

0
200 200 200 200 200 200 200 201 201 201 201 201 201 201 201 201 201 202 202 202 202
 Effect of COVID – China 2020
,
.
 Effect of COVID – World GDP

.
World GDP Forecast
 Fast Growing Countries

Less developed countries (LDCs)

have greatest capacity for growth

They start from lower base

Have more “catching up” to do

Brazil, Russia, India, China, South Africa

Often called: the “BRICS”
 GDP Growth
A well performing economy should:
Make more goods (food, clothing, housing)
Provide more services (health, education)
Create more jobs (meaningful occupation)

…create prosperity for all