Gross Domestic Product (GDP)

Inflation rate

is the percentage change in some measure of the price from one period to the next. Inflation rate in year 2= (GDP deflator in year 2-GDP deflator in year 1 /GDP deflator in year 1) X100

recession

two consecutive quarters of falling real GDP

Growth in Real GDP

(New GDP- Old GDP)/(old GDP) X100= percent growth

GDP=C+I+G+NX

C= Consumption -Spending by households on goods and services (except the purchase of new housing) I=Investment -Spending by firms on capital equipment, inventories and physical structures -Also includes household purchases of new housing G= Government purchases -Governement consumption expenditures and gross investment -Spending on goods and services by local, state, and federal governments -This does not include transfer payments NX= Net Exports, Exports-Imports -Exports are expenditures by foreign households and firms that buy domestically produced goods and services -Imports are expenditures by domestic households and businesses who buy foreign produced goods and services

GDP Deflator

It is a measure of the price level calculate as the ratio of nominal GDP to real GDP times 100. -GDP deflator value is 100 for the base year -It reveals the current level of prices relative to the base year level of prices. -It can be used to take inflation out of nominal GDP calculation in an attempt to "deflate" the value of nominal GDP. (Nominal GDP/Real GDP) X 100

Real GDP

calculates the value of all final goods and services valued at constant market prices. It helps to correct for inflation. -To calculate choose a base year to record all market prices. For the base year: Nominal GDP=Real GDP

Nominal GDP

calculates the value of all final goods and services valued at current market prices. It does not correct for inflation.

GDP is

the market value of all final goods and services produced within a country for a given period of time. -it estimates the total expenditure of the economies output of goods and services -it also measures the total income of everyone in the economy