ECON 1010 Lecture Notes - Gdp Deflator
27 Mar 2014
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Document Summary
Nominal gdp is calculated by summing the value of goods and services produced in a given year using the prices of these outputs in that year. If the general price level increases or decreases from one year to the next, it is difficult to compare the amount of output that a country produces across different years. To correct for this, we want to value output in every year using the same prices. Nominal gdp for each of three years is as follows: In order to calculate real gdp for each year, we need to first pick a base year. For each year (except the base year), we calculate a gdp deflator, which is a number, that, when divided into nominal gdp and multiplied by 100, yields the real gdp for that year. The gdp deflator is calculated by the following technique: construct a basket of goods. this basket represents things that an average family purchases in a year.
