ECO 1102 Chapter Notes - Chapter 4.1-5: Gross National Income, Efficiency Wage, Gdp Deflator
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ECO 1102 Full Course Notes
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In fact, when gdp increases from one year to the next, the increase is due in part to increases in production of goods and services and partly due to increases in prices. In order to separate price change from production quantity change, we need calculation. Calculating real gdp: we can separate the price changes from the quantity changes by calculating a measure of production called real. The further away from the base year we are, the bigger this problem becomes. To address this problem, statistics canada began to use chain-weighted prices, and it now publishes real. Real gdp holds prices constant, which makes it a better measure than nominal gdp of changes in the production of goods and services from one year to the next. Real gdp is smaller than nominal gdp in years after the base year because prices tend to rise over time.
