math 2uu3 lecture...
TRANSCRIPT
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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
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High school student (5 <=age<=19) monthly pass:
2016 $ 83.60 2018 $ 88.00
Increase follows inflaNon?
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Salary of a postdoc at McMaster (Math and Stats)
$ 33,000 in 1992 $ 45,000 in 2019
Which postdoc got a be;er deal?
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Using an inflaNon calculator (link is on the course page)
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Answer:
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CalculaNons:
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Things change: same request, several days later
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first calculaNon: from January to January the second Nme was from February to February
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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
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negaNve inflaNon
zero inflaNon
h;ps://inflaNoncalculator.ca/historical-‐rates-‐canada/
Canada historic CPI
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Large inflaNon:
1974 to 1975 29.0/26.2 = 1.1069 ... 10.69%
1980 to 1981 49.5/44 = 1.125 ... 12.5%
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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?
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Japan ... $ 150,000 Canada ... $120,000
Basis for comparison: the same basket of goods and services costs
$ 125 in Japan and $ 90 in Canada
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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?
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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
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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)
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companies listed …
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oldest company
Note: Because of long-‐term poor performance, General Electric was removed from Dow 30 in June 2018 and replaced by Walgreens
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Many sources report daily values and fluctuaNons
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Daily changes in the value of Dow30
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How is Dow30 calculated? Based on Dow divisor d
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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
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There are many indicators/ indices, for instance:
Standard and Poor 500 (S&P500)
NASDAQ Composite index
TSX (Toronto Stock Exchange index)
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Toronto Stock Exchange (TSX) …
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TSX … last three years
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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”
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Canada’s GDP: presently about 1,653 billion USD
[h;p://www.tradingeconomics.com/canada/gdp]
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[h;p://www.cbc.ca/news/business/gdp-‐june-‐staNsNcs-‐canada-‐1.4269811]
Historic GDP:
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[h;p://www.cbc.ca/news/business/gdp-‐june-‐staNsNcs-‐canada-‐1.4269811]
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h;ps://tradingeconomics.com/canada/gdp-‐growth-‐annual
GDP by quarters :
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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$]
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h;ps://www.forbes.com/sites/zackfriedman/2018/06/13/student-‐loan-‐debt-‐staNsNcs-‐2018/#7da233aa7310
U.S. Student debt
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[h;p://www.macleans.ca/poliNcs/the-‐north-‐and-‐the-‐great-‐canadian-‐lie/]
GDP does not tell the whole story
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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
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Canada’s GNP (GNI)
[h;p://www.tradingeconomics.com/canada/gross-‐naNonal-‐product]
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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.
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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)
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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
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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
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Canada: changes in Gini index 1992-‐2013
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HDI = human development index
is the measure of “well-‐being” based on:
Life expectancy index EducaNon index Income index
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h;ps://en.wikipedia.org/wiki/Human_Development_Index
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h;ps://en.wikipedia.org/wiki/Human_Development_Index
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Gini index = double the area of inequality
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World … Gini index in 2014
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Gini index = wealth distribuNon
h;p://www.conferenceboard.ca/hcp/Details/society/income-‐inequality.aspx
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h;p://www.conferenceboard.ca/hcp/Details/society/income-‐inequality.aspx
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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
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Can Canada do this?
h;ps://www.theatlanNc.com/business/archive/2015/03/finland-‐home-‐of-‐the-‐103000-‐speeding-‐Ncket/387484/
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traffic Nckets, fines proporNonal to income …
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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.
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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
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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.