Lecture 10 Notes

Lecture 10 Notes - 03/03/10 1 ECN 211 Macroeconomic...

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Unformatted text preview: 03/03/10 1 ECN 211 Macroeconomic Principles L10: National Income Accounting (Nominal Vs Real). 03/03/10 2 Nominal and Real Measures of GDP • Interested in real values- how much actual goods and services the economy has produced. • Nominal values tell us very little – Has GDP increased because output has increased or because prices have increased, or both?? – In simplistic terms GDP=P(Q) Nominal Vs Real Nominal GDP … nominal GDP measures output using the current year price of goods and services. Real GDP … real GDP is adjusted for changing price levels – Uses constant year price – From a “base year” 03/03/10 3 03/03/10 4 Base Year … the year against which other years are measured – When calculating real GDP the base years prices are used to calculate real GDP for all years – e.g. if 1996 is the base year – Real GDP in 2007 : 1996 prices (base years prices) and 2007 quantities – Nominal GDP in 2007 : 2007 prices (current prices) and 2007 quantities 03/03/10 5 Example Year Price of Hot dogs Quantity of hot dogs Price of Hamburgers Quantity of hamburgers 2005 $1 100 $2 50 2006 $2 150 $3 100 2007 $3 200 $4 150 Nominal GDP yearly growth 2005 = $1x100+$2x50= $200- 2006 = $2x150+$3x100=$600 200% 2007 = $3x200+$4x150=$1,200 100% 03/03/10 6 Example Year Price of Hot dogs Quantity of hot dogs Price of Hamburgers Quantity of hamburgers 2005 $1 100 $2 50 2006 $2 150 $3 100...
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This note was uploaded on 03/03/2010 for the course ECN 211 taught by Professor Kingston during the Spring '08 term at ASU.

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Lecture 10 Notes - 03/03/10 1 ECN 211 Macroeconomic...

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