Class Notes (903,452)
CA (538,001)
Carleton (18,232)
ECON (310)
ECON 1000 (236)
Nick Rowe (65)

ECON1000 CH. 6.docx

3 Pages

Course Code
ECON 1000
Nick Rowe

This preview shows page 1. Sign up to view the full 3 pages of the document.

Loved by over 2.2 million students

Over 90% improved by at least one letter grade.

Leah — University of Toronto

OneClass has been such a huge help in my studies at UofT especially since I am a transfer student. OneClass is the study buddy I never had before and definitely gives me the extra push to get from a B to an A!

Leah — University of Toronto
Saarim — University of Michigan

Balancing social life With academics can be difficult, that is why I'm so glad that OneClass is out there where I can find the top notes for all of my classes. Now I can be the all-star student I want to be.

Saarim — University of Michigan
Jenna — University of Wisconsin

As a college student living on a college budget, I love how easy it is to earn gift cards just by submitting my notes.

Jenna — University of Wisconsin
Anne — University of California

OneClass has allowed me to catch up with my most difficult course! #lifesaver

Anne — University of California
Measuring a Nations Income Continued Gross Domestic Product: measures the market value of all final goods and services produced within a country in a given period of time, used how to judge how the economy is performing, sheds light on whether the economy is expanding, contracting of stagnant Nominal GDP, Real GDP & GDP Deflator There are two versions of GDP because inflation can distrort economic variables like GDP. One is corrected for inflation and the other is not. • Nominal GDP: values output at current prices. It is not corrected for inflation. • Real GDP: values output at constant prices of a base year. It is corrected for inflation • GDP Deflator: in addition, a GDP deflator can be used to measure inflation. It is a measure of index of the overall level of prices. Why bother with different versions of GDP? Nominal GDP can be represented as follows: GDP = (P1 x Q1) + (P2 x Q2) + … (Pn x Qn) ...where P1 and Q1 is the price and quantity of good 1 and so on • Nominal GDP can increase year over year because… o Increase in quantity (volume) of g & s o Increase in prices (price level) • Important for decision makeers to know why GDP increased or fell Example: Economy producing Pizzas and Lattes Pizza Pizza Latte Latte year P Q P Q 2004 $10 400 $2.00 1000 2005 $11 500 $2.50 1100 2006 $12 600 $3.00 1200 To compute real GDP in each year: 2004: $10 x 400 + $2 x 1000 = $6000 (use 2004 as a base year) 2005: $10 x 500 + $2 x 1100 = $7200 (20% increase) 2006: $10 x 600 + $2 x 1200 = $8400 (16.7% increase) In each year… • Nominal GDP is measured using the (then) current prices--both quantity and price change • Real GDP is measured using constant price from 2004, therefore, only quantity changes o As if there was zero inflation and hence, real GDP is corrected for inflation The GDP Deflator A measure or index of the overall level of prices. EQ: GDP Deflator = 100 x (nominal GDP/real GDP) This is a way to measure the inflation rate: • Compute the % change of the GDP Deflator 2004: 100 x (6000/6000) = 100% 2005: 100 x (8250/7200) = 114.6% (increase of 14.6%) 2006: 100 x (10,800/8400) = 128.6% (increase of 12.2%) Question: Calculate Real GDP Year Nominal GDP GDP Deflator 2007 180 105 2008 200 125
More Less
Unlock Document

Only page 1 are available for preview. Some parts have been intentionally blurred.

Unlock Document
You're Reading a Preview

Unlock to view full version

Unlock Document

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.