When real gdp is computed the outputs of different

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Unformatted text preview: ral, a benchmark year—a year chosen as a point of reference for comparison. When real GDP is computed, the outputs of different years are priced at base-year levels. real GDP Gross domestic product (GDP) that has been adjusted for price changes; GDP measured in base-year, or constant, prices. Section 3 Real GDP 297 11 (286-309) EMC Chap 11 12/5/05 2:18 PM Page 298 Column 4 computes the GDP for a simple, one-good economy. The price in the current year is multiplied by the quantity produced in the current year. Column 5 computes real GDP by multiplying the price in 1987 (the base year for purposes here) by the quantity produced in the current year. Economists prefer working with real GDP to working with GDP because they know that if real GDP in one year is higher than real GDP in another year, output is greater in the year with the higher real GDP. produced in these years. Column 4 shows GDP for each year. (GDP equals the current-year price times the current-year quantity of watches.) etween 1990 and 2003, prices increased about 43 percent. This increase doesn’t mean that the price...
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This document was uploaded on 01/16/2014.

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