Scribd
Upload
27 views10 pages

Chapter 4. Nominal and Real GDP

The calculation of real and nominal GDP

Uploaded by

kahzan300
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
27 views10 pages

Chapter 4. Nominal and Real GDP

The calculation of real and nominal GDP

Uploaded by

kahzan300
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 10

National Income

Nominal and Real GDP


Chapter 4
Learning Outcome
• Students will learn the purpose of calculating GDP
• Identify the difference between nominal and real Gross
Domestic Product (GDP) values
• Explain whether GDP is a good indicator
• GDP deflator to measure inflation
Nominal GDP
• The nominal GDP is the value of all the final goods and services that an
economy produced during a given year. It is calculated by using the prices
that are current in the year in which the output is produced. In
economics, a nominal value is expressed in monetary terms.
• For example, a nominal value can change due to shifts in quantity and
price. The nominal GDP takes into account all of the changes that
occurred for all goods and services produced during a given year.
• If prices change from one period to the next and the output does not
change, the nominal GDP would change even though the output
remained constant.
Nominal GDP
• Nominal GDP is GDP evaluated at current market prices.
Therefore, nominal GDP will include all of the changes in
market prices that have occurred during the current year
due to inflation or deflation
• Nominal GDP is GDP measured in current dollars, or the
current prices we pay for things. Nominal GDP includes
all the components of GDP valued at their current prices.
• When a variable is measured in current dollars, it is
described in nominal terms.

4 of 38
Real GDP

• The real GDP is the total value of all of the final goods and services that
an economy produces during a given year, accounting for inflation. It is
calculated using the prices of a selected base year. To calculate Real GDP,
you must determine how much GDP has been changed by inflation since
the base year, and divide out the inflation each year. Real GDP, therefore,
accounts for the fact that if quantity change but price does not.
• In economics, real value is not influenced by changes in price, it is only
impacted by changes in quantity.
Nominal GDP VS. Real GDP
• Nominal GDP, or unadjusted GDP, is the market value of all final goods
produced in a geographical region, usually a country. That market value
depends on the quantities of goods and services produced and their
respective prices.
• if prices change from one period to the next but actual output does not,
nominal GDP would also change even though output remained constant.
• In contrast, real GDP accounts for price changes that may have occurred due
to inflation. In other words, real GDP is nominal GDP adjusted for inflation. If
prices change from one period to the next but actual output does not, real
GDP would be remain the same. Real GDP reflects changes in real
production. If there is no inflation or deflation, nominal GDP will be the
same as real GDP.
Calculate nominal and real GDP take 2015 as
base year
Calculating the GDP Deflator
• a price index used to adjust nominal GDP to find real GDP; the GDP
deflator measures the average prices of all finished goods and services
produced within a nation’s borders over time.
• The base year used for comparison in the determination of price changes
using the GDP deflator price index; the deflator in a base year is always
equal to =100

8 of 38
Key Equations
Class Test
• Calculate nominal GDP, Real GDP and GDP deflator and inflation rate as
well

Pizza

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy