Economics 1022A/B Lecture Notes - Lecture 2: Potential Output, Business Cycle

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blushox643

15 Jan 2017

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Western University

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Economics

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Economics 1022A/B

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ECON 1022A/B Full Course Notes

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Econ 1022 lecture 1 notes - measuring canada"s gdp. Nominal gdp is the value of goods and services produced during a given year valued at the prices that prevailed in that same year. Nominal gdp is just a more precise name for gdp. Real gdp is the value of final goods and services produced in a given year when valued at the prices of a reference base year. The (cid:271)est (cid:449)ay to (cid:373)ake sure (cid:449)e"re (cid:373)easuri(cid:374)g our produ(cid:272)tio(cid:374) i(cid:374)stead of (cid:272)ha(cid:374)gi(cid:374)g prices. Currently, the reference base year is 2007 and we describe real gdp as measured in 2007 dollars. Statistics canada uses a measure of real gdp called chained-dollar real gdp. Three steps are needed to calculate this measure: Value production in two adjacent years the prices of both years. Calculate both percentage changed and take average of two percentage changed. 2013 quantities at 2013 prices (nominal gdp for 2013) 2014 quantities at 2014 prices (nominal gdp for 2014)

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7. The difference between nominal GDP and real GDP is that nominal GDP:

	A.	measures a country's production of final goods and services at current market prices, whereas real GDP measures a country's production of final goods and services at the same prices in all years.
	B.	is measured in dollar terms, whereas real GDP is measured in terms of numbers of goods and services produced
	C.	measures the total value of only final goods and services, whereas real GDP measures the value of all goods and services, both intermediate and final
	D.	measures a country's production of final goods and services at fixed prices, whereas real GDP measures a country's production of all final goods and services at current market prices

carminekoala560

Real versus nominal GDP

Consider a simple economy that produces two goods: apples and muffins. The following table shows the prices and quantities of the goods over a three-year period.

Year	Apples		Muffins
	Price	Quantity	Price	Quantity
	(Dollars per apple)	(Number of apples)	(Dollars per muffin)	(Number of muffins)
2008	1	150	2	160
2009	2	135	4	230
2010	3	110	4	165

Use the information from the previous table to fill in the following table.

Year	Nominal GDP	Real GDP
Year	(Dollars)	(The base year 2008, dollars)
2008
2009
2010

1. From 2009 to 2010, nominal GDP (decreased or increased), and real GDP (decreased or increased).

2. Why is real GDP a more accurate measure of an economy's production than nominal GDP?

A. Real GDP measures the value of the goods and services an economy produces, but nominal GDP measures the value of the goods and services an economy consumes.

B. Nominal GDP is adjusted for the effects of inflation or deflation, whereas real GDP is not.

C. Real GDP is not influenced by price changes, but nominal GDP is.

magentamarten240

Real versus nominal GDP

Consider a simple economy that produces two goods: apples and oranges. The following table shows the prices and quantities for the goods over a three-year period.

Year	Apples		Oranges
	Price	Quantity	Price	Quantity
	(Dollars per apple)	(Number of apples)	(Dollars per orange)	(Number of oranges)
2010	1	120	1	195
2011	2	130	4	195
2012	4	130	4	145

A. Use the information from the previous table to fill in the following table.

Year	Nominal GDP	Real GDP	GDP Deflator
Year	(Dollars)	(Base year 2010, Dollars)	GDP Deflator
2010
2011
2012

B. From 2011 to 2012, change in nominal GDP is __________, and real GDP is ________.

C. The inflation rate in 2012 was ____________.

D. Why is real GDP a more accurate measure of an economy's production than nominal GDP?

a. Real GDP does not include the value of intermediate goods and services, but nominal GDP does.

b. Real GDP includes the value of exports, but nominal GDP does not.

c. Real GDP is not influenced by price changes, but nominal GDP is.

lilacpig169

Economics 1022A/B Lecture Notes - Lecture 2: Potential Output, Business Cycle

ECON 1022A/B Full Course Notes

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