EC140 Lecture Notes - Lecture 3: Gdp Deflator, Potential Output, Output Gap
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EC140 Full Course Notes
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Ec140 class 3 - measuring inflation and income. Expenditure side: consumption, investment, govt spending, import, export. Recessionary gap = unemployment; inflationary gap = inflation. Exchange rate: amount of domestic currency needed to purchase a unit of foreign currency. Depreciation of cad costs more to buy usd canada-us exchange rate increases. Calculating real and nominal gdp: (what was produced) Multiply quantities by current prices for nominal gdp. Multiply those quantities by prices from the base period for real gdp. Divide nominal gdp by real gdp to calc gdp deflator. Eg. 70k x 1 + 25k x 1 = 95k. Current year: nominal gdp based on current year prices. Current year: real gdp based on base year prices. Nominal gdp = current amount x current prices. Real gdp = current amount x base prices. If gdp goes up (cid:271)/(cid:272) pri(cid:272)es go up it"s not ne(cid:272)essarily good.
