CAS EC 102 Lecture 4: 1/26 Lecture 4

• School: Boston University
• Department: Economics
• Course: CAS EC 102
• Professor: Bruce Watson

Document Summary

Nominal gdp: the value of all goods and services measured at current prices. If we"re measuring 2016 gdp, and based on what they cost in 2016, that"s nominal gdp. Assume there are n goods produced in the economy: 2016 nominal gdp = (cid:1842)(cid:2869)(cid:2874)(cid:2869)(cid:1843)(cid:2869)(cid:2874)(cid:2869) + (cid:1842)(cid:2869)(cid:2874)(cid:2870)(cid:1843)(cid:2869)(cid:2874)(cid:2870) + (cid:1842)(cid:2869)(cid:2874)(cid:2871)(cid:1843)(cid:2869)(cid:2874)(cid:2871) + + (cid:1842)(cid:2869)(cid:2874)(cid:1843)(cid:2869)(cid:2874) We can"t compare nominal gdp in 2016 with 1960 because the effect of price changes, such as inflation. *real gdp: the value of all goods and services measured at a constant price level. Pick random recent yearsay we use year 2005 as a base. 2016 real gdp = (cid:1842)(cid:2868)(cid:2873)(cid:2869)(cid:1843)(cid:2869)(cid:2874)(cid:2869) + (cid:1842)(cid:2868)(cid:2873)(cid:2870)(cid:1843)(cid:2869)(cid:2874)(cid:2870) + (cid:1842)(cid:2868)(cid:2873)(cid:2871)(cid:1843)(cid:2869)(cid:2874)(cid:2871) + + (cid:1842)(cid:2868)(cid:2873)(cid:1843)(cid:2869)(cid:2874) Ipad wasn"t around in 2005 but its components still around separately in 2005, just not assembled so give each an individual price and if assembled in 2005, that price. So actually, only around 7 times more production in 2016 compared to 1960.