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Lecture 25

ECON 1020 Lecture 25: Lecture 25

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ECON 1020
Ryan A.Compton

OS82 1. Break down nominal GDP into physical quantities of output (Q) and prices (P) for each year 2. Find real GDP for each year by determining the dollar amount that each years physical output would have sold for if baseyear prices had prevailed Use the BASE years price, but the other years quantities, when calculating ALL years of the real GDP RealWorld Considerations and Data: The national income accounting must a weight to each of the 380 categories of goods and services based on the relative proportion of each category in total output Fixed based price index: worked well as long as the weights remained relatively constant from year to year Rapid expansion of the information technology (IT) sector made many prices for the output of this sector fall dramatically o Overweighting these goods and services The new Statistics Canada method of calculating GDP considers both quantities and prices in the base year and the following year, and then averages the two Chainweighted index: adjusted annually to better represent the weight of each category, particularly the IT sector Chainweighted index links each year to the previous year through the use of both the prioryear prices and currentyear prices Once we have determine nominal GDP and real GDP we can calculate the GDP deflator Once we have determined nominal GDP and the price index we can calculate real GDP Shortcomings of GDP:
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