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23 Nov 2019

Explain the difference between the nominal GDP and real GDP. What must be the relationship between nominal GDP and real GDP during the base year

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Nelly Stracke
Nelly StrackeLv2
24 Apr 2019
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Related questions

Discuss the nature and function of a price index, and describe the difference between nominal and real GDP, by answering the following questions:

1. Assume that nominal GDP for 2012 was $700B with a price index of 110 (using 2004 as the base year). What is the real GDP for 2012?

Remember: To compute the real GDP for any given year use this forrmula: Real GDP = Nominal GDP/Price Index x 100

2. Assume that nominal GDP for 2013 was $850B with a price index of 140 (using 2004 as the base year). What is the Real GDP for 2013?

Remember the fromula :Real GDP = Nominal GDP/Price Index x 100

3. Did real GDP increase or decrease from 2012 to 2013? If it decreased, explain why? Compare your answers form question (1) and (2) above and answer question (3).

4. Why do economists use real GDP, rather than nominal GDP, to measure economic growth?

E. Explain the difference between nominal and real GDP, and how to calculate real GDP

f. Explain the difference between GDP and Per Capita GDP; explain how to calculate Per Capita GDP, and how Per Capita GDP can be used.

In 1982, nominal GDP decreased by 2% while real GDP increased 4%. What explains the difference between nominal GDP and real GDP? Which is a better indicator of how the economy is performing? Explain.

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