ECO 304L Chapter Unit 1: Ch 1-4: Corrections for inflation

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greenwalrus59

7 Oct 2017

School

UT-Austin

Department

Economics

Course

ECO 304L

Professor

M O S T A S H A R I, S H A L A H

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Document Summary

Corrections for inflation: gdp is measured in terms of money values. We use money values because it makes the aggregation of different types of goods and services possible. Gdp presents a problem when we want to compare gdp figures during two different years (as we would want to do to calculate gdp growth). If nominal gdp changes over time, you cannot tell whether this change is caused by. A change in the quantity of goods and services produced (economic expansion or contraction) or. Recent statistics use 2005 as the base year. We get real gdp by dividing the nominal gdp figure by the price index: consider the following example, using actual data: Real gdp in the first two quarters of 2012 was: . 811 x 1012 = . 653 x 1012 (115. 810 / 100: a bit on terminology: in the above examples, we would say that the real.

Related Questions

Real versus nominal GDP

Consider a simple economy that produces two goods: apples and muffins. The following table shows the prices and quantities of the goods over a three-year period.

Year	Apples		Muffins
	Price	Quantity	Price	Quantity
	(Dollars per apple)	(Number of apples)	(Dollars per muffin)	(Number of muffins)
2008	1	150	2	160
2009	2	135	4	230
2010	3	110	4	165

Use the information from the previous table to fill in the following table.

Year	Nominal GDP	Real GDP
Year	(Dollars)	(The base year 2008, dollars)
2008
2009
2010

1. From 2009 to 2010, nominal GDP (decreased or increased), and real GDP (decreased or increased).

2. Why is real GDP a more accurate measure of an economy's production than nominal GDP?

A. Real GDP measures the value of the goods and services an economy produces, but nominal GDP measures the value of the goods and services an economy consumes.

B. Nominal GDP is adjusted for the effects of inflation or deflation, whereas real GDP is not.

C. Real GDP is not influenced by price changes, but nominal GDP is.

magentamarten240

Real GDP is preferred to nominal GDP as a measure of economic performance because:

A) nominal GDP uses current prices and thus may over- or understate true changes in output.

B) nominal GDP only includes goods and excludes services.

C) nominal GDP is not adjusted for population changes.

D) real GDP accounts for changes in the quality of goods and services produced.

)

burgundyhornet133

Measures of Inflation The GDP deflator is the broadest, most inclusive measure of change in the country's price level since it includes all final goods and services produced and sold. But the GDP deflator is not used by the government or economists as the benchmark measure of inflation; instead, the consumer price index (CPI) is used to determine changes in the cost of living. What is the shortcoming of the GDP deflator as a measure of inflation for households, and why is the CPI considered to be a more useful measure?

greycoyote29

ECO 304L Chapter Unit 1: Ch 1-4: Corrections for inflation

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