math 2uu3 lecture...
TRANSCRIPT
Historic CPI, base: 100 = year 2002 Stats Canada
Source: Stats Canada h;p://www.statcan.gc.ca/tables-‐tableaux/sum-‐som/l01/cst01/econ46a-‐eng.htm
High school student (5 <=age<=19) monthly pass:
2016 $ 83.60 2018 $ 88.00
Increase follows inflaNon?
Salary of a postdoc at McMaster (Math and Stats)
$ 33,000 in 1992 $ 45,000 in 2019
Which postdoc got a be;er deal?
Using an inflaNon calculator (link is on the course page)
Answer:
CalculaNons:
Things change: same request, several days later
first calculaNon: from January to January the second Nme was from February to February
Note: CPI, and thus inflaNon, depend on the calculaNon method used:
The table (start of the lecture) is from Stats Canada; CPI is calculated as average over 12 months in the calendar year
The inflaNon calculator from Bank of Canada compares CPIs from January/February of one year to January/February of another
negaNve inflaNon
zero inflaNon
h;ps://inflaNoncalculator.ca/historical-‐rates-‐canada/
Canada historic CPI
Large inflaNon:
1974 to 1975 29.0/26.2 = 1.1069 ... 10.69%
1980 to 1981 49.5/44 = 1.125 ... 12.5%
PPP = Purchasing Power Parity
CPI = price changes over Nme, PPP = price changes across countries
Compare salaries in Japan and Canada (expressed in a common currency, called InternaNonal Dollar):
Example: salaries Japan ... $ 150,000 Canada ... $120,000
Who makes more?
Japan ... $ 150,000 Canada ... $120,000
Basis for comparison: the same basket of goods and services costs
$ 125 in Japan and $ 90 in Canada
Example: 1 kg of bananas (again, InternaNonal $)
in Canada ... $ 0.79 in Austria ... $ 0.87
what is $100 in Canada equivalent to in Austria, i.e., how much do we have to pay in Austria for a thing that costs $100 in Canada?
Avocado toast index …
… convenNonal grumpy wisdom, most recently arNculated by Australian tycoon Tim Gurner, who made internaNonal headlines this month for blasNng young home buyers for their spending habits.
The 35-‐year-‐old property developer told the Australian ediNon of 60 Minutes that when he was saving for his first home, he “wasn't buying smashed avocado for $19 and four coffees at $4 each”
h;p://www.bbc.com/capital/story/20170530-‐the-‐avocado-‐toast-‐index-‐how-‐many-‐breakfasts-‐to-‐buy-‐a-‐house
Dow30 (former Dow Jones Industrial Average)
Created by Wall Street Journal in 1896
It is one possible measure that shows how a selecNon of companies trades on a parNcular day
Why important? Many financial decisions are based on it (as well as on other indices)
companies listed …
oldest company
Note: Because of long-‐term poor performance, General Electric was removed from Dow 30 in June 2018 and replaced by Walgreens
Many sources report daily values and fluctuaNons
Daily changes in the value of Dow30
How is Dow30 calculated? Based on Dow divisor d
How is Dow30 calculated?
Dow30 = sum of the unit prices of the 30 stocks divided by d=0.14523396877348 (why so many decimals?)
unit price = price of 1 unit of stock
There are many indicators/ indices, for instance:
Standard and Poor 500 (S&P500)
NASDAQ Composite index
TSX (Toronto Stock Exchange index)
Toronto Stock Exchange (TSX) …
TSX … last three years
GDP = Gross domesNc product = monetary value of all final (i.e., bought by a final user) goods and services produced over a specific Nme interval (usually quarterly and yearly) in a given country
GDP = producNon + expenditure + income
GDP is a measure of the “size of the economy”
Canada’s GDP: presently about 1,653 billion USD
[h;p://www.tradingeconomics.com/canada/gdp]
[h;p://www.cbc.ca/news/business/gdp-‐june-‐staNsNcs-‐canada-‐1.4269811]
Historic GDP:
[h;p://www.cbc.ca/news/business/gdp-‐june-‐staNsNcs-‐canada-‐1.4269811]
h;ps://tradingeconomics.com/canada/gdp-‐growth-‐annual
GDP by quarters :
How much is 1.635 trillion dollars? Compare …
Apple … about 900 billion dollars
Amazon … about 900 billion dollars
Google… about 800 billion dollars
Student loan debt in U.S. … 1.5 trillion dollars
[all $ on this page are US$]
h;ps://www.forbes.com/sites/zackfriedman/2018/06/13/student-‐loan-‐debt-‐staNsNcs-‐2018/#7da233aa7310
U.S. Student debt
[h;p://www.macleans.ca/poliNcs/the-‐north-‐and-‐the-‐great-‐canadian-‐lie/]
GDP does not tell the whole story
GNP/GNI = Gross naNonal product/income = the total domesNc and foreign output claimed by residents of a country, consisNng of gross domesNc product (GDP), plus incomes earned by residents living abroad, minus income earned in the domesNc economy by nonresidents
Canada’s GNP (GNI)
[h;p://www.tradingeconomics.com/canada/gross-‐naNonal-‐product]
GDP and GNP/GNI are viewed as important indicators, even though they are global (goods, services all added up), and insensiNve to diversity within a country, human rights, and so on.
These are analyzed/calculated/reported by • World Bank (the World Bank Group) • InternaNonal Monetary Fund • United NaNons
They are far from objecNve, and fair, and are/could be misleading in many ways.
GDP and GNP/GNI measure the“size of the economy”
(Canada: GDP = 1.653 trillion US $) (Canada: GNP = 1.679 trillion US $)
GNP/GNI per capita measures the “standard of living”
(Canada: 45,750 US $ approx. 58,600 $ Cdn)
Recession is slowdown of businesses – results in general slowdown of economic acNvity
Defini&on of recession: 2 consecuNve quarters when GDP decreases (meaning negaNve growth rate)
During a recession, GDP decreases, household income decreases, unemployment increases, number of bankruptcies increases
Last recession in Canada: Q4 (2008) unNl July 2009
Depression is a large magnitude slowdown (“negaNve growth”) of economic acNvity
Defini&on of depression (depends on the country): prolonged recession, with GDP falling by 10% or more
Canada: changes in Gini index 1992-‐2013
HDI = human development index
is the measure of “well-‐being” based on:
Life expectancy index EducaNon index Income index
h;ps://en.wikipedia.org/wiki/Human_Development_Index
h;ps://en.wikipedia.org/wiki/Human_Development_Index
Gini index = double the area of inequality
World … Gini index in 2014
Gini index = wealth distribuNon
h;p://www.conferenceboard.ca/hcp/Details/society/income-‐inequality.aspx
h;p://www.conferenceboard.ca/hcp/Details/society/income-‐inequality.aspx
Table data source: World Bank h;ps://data.worldbank.org/indicator/SI.POV.GINIend=2013&locaNons=CA&start=1981&view=chart
Historic Gini Index in Canada
Can Canada do this?
h;ps://www.theatlanNc.com/business/archive/2015/03/finland-‐home-‐of-‐the-‐103000-‐speeding-‐Ncket/387484/
traffic Nckets, fines proporNonal to income …
Money exchange rates between countries
• daily business: as determined by banks, financial insNtuNons
• comparing economy parameters (GNI, GDP, etc.): using purchasing power parity (PPP), which means that the exchange rate between two countries is equal to the raNo of the currencies' respecNve purchasing power.
however …
GDP and GNI are reported as relaNve increase/decrease with respect to some previous date
GDP per capita (indicator of living standard) is an average and does not tell the truth
GE's stock plunge helped lead to its exit from the Dow. That's because the Dow is price-‐weighted, meaning that GE's $13 price tag had li;le impact on the index. S&P noted that GE had a weight of less than half a percentage point.