San José State University|
Department of Economics
& Tornado Alley
(GDP) of Canada 1968-2005
The production of goods and services that takes places within the geographic limits of a country is called its Gross Domestic Product (GDP). Double counting of intermediate production is avoided by counting only production for final users; i.e., production that is not incorporated into other production within the country within the accounting period. This means that only sales to consumers, business investors, government and net exports are counted. GDP is also the sum total of value-added by the production units of the country and also the sum total of the payments made by the productions units for the resources used in production. For more on the concept of GDP see Gross Domestic Product. To avoid having the figures reflect price changes as well as actual changes in production GDP is computed using constant prices (the prices of one year). This is called real GDP, as opposed to nominal GDP in which current year prices are used.
The values of Canda's GDP, nominal and real, are given below.
|Gross Domestic Product,
Nominal and Real,
of Canada, 1968-2005
It is always easier to comprehend the trend of statistics in a visual display. Here is the graph of the above data.
There is another concept for the production of a country. It is called Gross National Income (GNP). This is the total production achieved with the resources owned by the citizens (nationals) of a country. For GNP the labor income of Canadian citizens working in the U.S. or any other foreign country are counted as part of the GNP of Canada (but not part of its GDP). Likewise the labor income of foreign workers in Canada are not part of its GNP. The same applies for profits of Canadian companies earned in foreign countries and the profits of foreign comapanies earned in Canada. Because of the special economic relationship of Canada and the United States the GDP and GNP could be significantly different. The statisics for nominal GDP and GNP for Canada are shown below:
|Gross Domestic Product and
Gross National Product of Canada,
As can be seen from the above, there is more income for foreign resources (labor and capital) operating in Canada than for Canadian resources operating in foreign countries. In 2005 the difference was C$ 24.52 billion.
In order to compare the size of the Canadian economy with that of another country it is necessary to put both countries GDP into the same currency. The conversion factor used strongly affects the comparison. The market exchange rate of the U.S. and Canadian dollars reflects the relative power of the two currencies so it is the appropriate conversion factor. In 2005 the average value of the Canadian dollar was US$ 0.82525. Thus the US dollar value of the Canadian GDP in 2005 was US$ 1129.54. In 2005 the U.S. GDP was US$12455.8. Thus Canada's GDP was 9.06 percent of the US GDP. Canada of course had a population of only 32.27 million compared to 288.38 million for the US. This means the per capita GDP in Canada in 2005 was US$ 35,003 while that of the US was US$ 43,192.
The populations of Canada and California are roughly the same amount so a comparison of the two economies is appropriate. It is said that if California were an independent nation it would be the eighth largest in the world. In 2005 the Gross State Product (its GDP) was US$ 1622 billion. This was 43.6 percent larger than that of Canada.
A comparison of sunny California with Canada is perhaps not appropriate. Perhaps a more appropriate comparison would be with the northern tier of U.S. states that have a land border with Canada. The gross state products of these states total US$ 2316.18 billion, a figure over twice as large, 105 percent greater than that of Canada. If Ohio and Pennsylvania, which have a water border with Canada, are included in the total, then the figure for the production in the border tier of states is US$ 3246.13 billion, which is nearly three times that of Canada, 187.4 percent larger to be precise. Canada has done very well economically but not nearly as well as the tier of states to its immediate south. The comparison of Canada with the tier of U.S. on its border is not nearly so disadvantageous as the comparison of the GDP of Mexico with the tier of U.S. states on its border. That tier has a level of production in 2005 of US$ 2896.96 billion compared with a GDP of Mexico of US$ 717 billion. The southern tier's level of production was over four times larger. The above figure for the GDP uses the market exchange rate for the conversion of GDP for Mexican pesos to dollar. If the relative purchasing power parity is used instead the GDP of Mexico in 2005 was US$ 1066 billion. The production of the southern tier of states was then only 2.72 times that of Mexico, roughly the same ratio but smaller than the ratio of the production of the northern tier of states compared to Canada of 2.87.
(To be continued.)
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