ECON 2H03 - Chapter 2 Notes - 2

ECON 2H03 - Chapter 2 Notes - 2 - Real vs nominal GDP GDP...

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Real vs. nominal GDP GDP is the market value of all final goods and services produced. Nominal GDP measures these values using current prices. Real GDP measure these values using the prices of a base year (past prices). Real GDP controls for inflation Changes in nominal GDP can be due to: 1 changes in prices. 1 changes in quantities of output produced. Changes in real GDP can only be due to changes in quantities, because real GDP is constructed using constant base- year prices. GDP Deflator (GDPD) GDPD is a price index that measures the overall level of prices of goods and services included in
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Unformatted text preview: quantities (RGDP) and the other measures prices (GDPD) Inflation rate is the measure of % change in price level from one period to the next Consumption spending, C Investment spending, I government spending, G exports, NX An important identity: Y = C + I + G + NX Consumption (C) The value of all goods and services bought by households (58.8% of G includes: • durable goods last a long time e.g., cars, home appliances nondurable goods last a short time e.g., food, clothing services work done for consumers e.g., dry cleaning, air travel...
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