CH7-27.02.09 - 45000 33750 b An Alternative Method Another...

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27.02.2009 CHAPTER 7 Measuring Domestic Output, National Income and the Price Level Nominal GDP versus Real GDP Adjustment Process in a One-Product Economy There are two methods a. GDP Price Index: Price index is the ratio of the prices of a specific year to the prices of benchmark year called base year, multiplied by 100. Example: *The index of the base year= *The index of the year 1= *The index of the year 2= In order to compute the adjusted value we divide the nominal value by the price index of the year multiply by 100. For example: We get the adjusted value of the year one as follows: Year Prices Index Quantity Nominal Value Adjusted Value 1 120 80 150 18000 22500 2 150 100 200 30000 30000 Base Year 3 200 133 225 45000
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Unformatted text preview: 45000 33750 b. An Alternative Method: Another method in evaluating the adjusted value is using the prices of the base year. For example: In computing the real value of the years 1, 2 and 3 we use the prices of the year. Real World Considerations The GDP Price Index which is called the GDP Deflator, measures prices for all finished goods in the economy. The GDP Deflator measures changes in the overall level of prices for the goods and services that make up GDP. GDP Deflator measures the difference between the real GDP and the nominal GDP. -Producer Price Index (PPI) -> Üretici Fiyatları Endeksi (ÜFE)-Consumer Price Index (CPI) ->Tüketici Fiyatları Endeksi (TÜFE) Year Price (as $) 1 120 Base Year 2 150 3 200...
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