ECON 203 1nd Edition Lecture 26Outline of Last Lecture I. Gross Domestic Producta. Dollar valueb. Newly producedc. Domestically producedd. Final goods and servicesII. Expenditures ApproachIII. Real GDPOutline of Current LectureI. Nominal GDPII. Real GDPCurrent LectureI. Nominal GDP2012 2013P q p qBall 5 10 6 12Gum 1 100 2 50Books 10 50 12 40GDP2012= (5*10)+(1*100)+(10*50)=650GDP2013=(6*12)+(2*50)+(12*40)=652The problem with nominal GDP is that both P and Q can, and often do, change from yearyear, but it doesn’t tell which one changesII. Real GDPValues output in each year using the same prices( assign a labeled “base year” to 2012 prices and compute what is produced each year using those prices)Real GDP2012= (5*10)+(1*100)+(10*50)=650Real GDP2012=nominal GDP2012 because 2012 is the base year!!These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.Real GDP2013=(5*12)+(1*50)+(10*40)= 510Comparing the real GDP’s tells us whether a society is doing better, worse, or the sameY= nominal GDPQ= real GDPP= price levelY=P*QP2012=Y2012Q2012=650650=1 P2013=Y2013Q2013=1.2784P2013 – P2012 =1.2784-1= 0.2784On average, prices have risen by 27.84% from 2012 to
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