September 25th - Real GDP vs. Nominal GDP

# September 25th - Real GDP vs. Nominal GDP - 1933 Per Capita...

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Review section – Monday September 29, 2008 – 6pm Thompson 104 MidTerm exam – Thursday October 2, 2008 – 7 to 9pm Location: TBA Real GDP vs. Nominal GDP GDP = Price X Quantity to look at GDP we have to remove inflation over the years. year GDP Population Per Capita GDP 1933 \$ 56 billion 126 million \$ 444 1990 \$ 5,600 billion 250 million \$ 22,400 Real GDP \$ 622 billion \$ 2,488 Maybe better off then back then but not by 50 times. Nominal GDP greatly exaggerates our increase in productivity. Products increased by 800% inflation so 1\$ back then \$9 now. We have to look at output based on process to check how much better off we are. To calculate real GDP 1990(based on 1933 prices) = Nominal GDP 1990 (1990 price level / 1933 price level) CPI – Consumer Price Index 1990 price level = 900 1933 price level = 100 So Real GDP 1990 based on 1933 prices: 5600/9/1 = 5600/9 = \$622 billion (11x more than we did in

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Unformatted text preview: 1933) Per Capita 22,400/9 = \$2,488 (5x more stuff per person today vs. 1933) GDP – Domestic Product-Depreciation _________________ NDP – Net Domestic Product – the net output we could produce without reducing our production. If we want to maintain our production we much: Investment = Depreciation NDP + Net Foreign Factor Income – could be negative if the flow out of the country by foreign workers _________________ NI – National Income is the income earned by our factors of production-Indirect Business Tax-Corporate Tax-Retained Earnings-Social Security Taxes + Transfer Payments + Net Interest __________________ Personal Income Personal Income-Personal Taxes _________________ Disposable Income – goes to two things Y D (Disposable Income) = C (consume it) + S (save it)...
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September 25th - Real GDP vs. Nominal GDP - 1933 Per Capita...

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