GDP
Why does inflation make nominal GDP a poor measure of the increase in total production from one year to the next?
When nominal GDP increase from year to year the increase is due partly to changes in prices and partly to changes in quanitites
GDP deflator
(Nominal GDP/ Real GDP)X100
how does real GDP deal with the problem inflation causes with nominal GDP?`
1.Real GDP uses the prices of goods and service in the base year to calculate the value of goods in all other years. 2.Real GDP separates price changes from quantity changes. 3. By keeping prices constant, we know that changes in real GDP represent changes in the quantity of output produced.
Real GDP
Calculated by quantity final goods in present year multiplied by price of base year for items. Growth rate is new year / old year *100
If nominal GDP is less than real GDP, then price level must have fallen during the year.
True. Nminal GDP wil be less than real GDP if the price level falls and is lower than the base year's price
Assuming that inflation has occurred over time, what is the relationship between nominal GDP and real GDP in each of the following situations.
In years after the base year nominal GDP is greater than real GDP. In the base year nominal GDP is equal to real GDP. In years before the base year, nominal GDP is less than real GDP.
GDP graph
Nominal starts on top until base yea then real gdp is higher.
More Real GDP
The value of final gods and services evaluated at base years.
Nominal GDP
The value of final goods and services evaluated at curent year prices
Adjusting for inflation is more realistic view because it reveals.
increase in prices at constant dollars The best method for measure of how well a movie does is the inflation adjusted dollar value of tickets sold. Newspaper do not report the number of tickets sold since the dollar value of tickets sold is a better measure.
annal increase
is not the same to GDP deflator is always greater than 100 or around this number
Real GDP based on Bure of E AC
uses chain weights