ECO1011S Week 1 Day 4 - Nominal vs Real GDP Real and...

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Nominal vs Real GDP Nominal actual money values at a given point in time ‘current prices’ includes both changes in production and in prices Real accounts for price changes (inflation) ‘constant’ or ‘base-period prices’ only accounts for changes in production 2 Real and nominal variables Inflation means the same outputs could cost more this year than last year This means that we need to know how much of a given change in GDP is related to price changes, and how much to changes in output We therefore distinguish between real and nominal measures
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Further considerations Timing of production versus date of sale Role of inventories GDP is a flow variable Stock variables Resale of existing houses and motorcars The meaning of “ Gross ” in GDP Depreciation was 13% of GDP in 2013 3
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Value added by sector in different countries 4 Country Primary (%) Secondary (%) Tertiary (%) Brazil 5.5 28.5 66.0 Canada 2.0 28.4 69.6 China 10.6 49.2 40.2 France 2.2 20.3 77.4 Germany 0.9 30.1 69.0
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