ECO 1102 Lecture Notes - Lecture 7: Composite Good, Big Mac Index
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Eco 1102 - lecture 7 - chapter 8 part 2. Each of these weights are attached to its corresponding price level in order to calculate the overall deflator, which measures the price level for a synthesised, composite good. Every year has a value for real gdp designated in constant dollars of the original year. The year in which the deflator is equal to 100. They also have a value for nominal gdp denominated in current dollars of the year. Purpose for deflators - to convert nominal quantities into real quantities and vice-versa. It exceeds the real gdp that is kept constant in 2002 prices. For example, if the prices in 2006 are greater than what they were in 2002, the nominal. Gdp encountered in 2006 were designated in 2006 prices. It also goes beyond the real gdp experienced in 2006 denominated in 2002 prices since. 2002 prices are worth more than 2006 prices.
