Class Notes (807,038)
York University (33,494)
Economics (1,498)
ECON 2400 (121)
Lecture

# Ex2_real_GDP_price_indexes.pdf

3 Pages
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School
York University
Department
Economics
Course
ECON 2400
Professor
Wai Ming Ho
Semester
Fall

Description
AP/ECON2400A (Fall 2012) W.Ho Example 2: Calculating Real GDP and Price Indexes An economy producing only two ▯nal goods, X and Y . Year 1 Year 2 % changes Quantity good X 60 80 +33:33% good Y 40 100 +150% Price good X \$3:00 \$5:00 +\$66:67% good Y \$0:50 \$0:60 +\$20% Nominal GDP \$200 \$460 +130% (in current prices) Real GDP \$200 \$290 +45% (in Year 1 prices) Real GDP \$324 \$460 +41.98% (in Year 2 prices) Real GDP \$200 \$286.96 +43.48% (in Year 1 dollars, chain-weighting) Real GDP \$320.60 \$460 +43.48% (in Year 2 dollars, chain-weighting) Nominal GDP of Year 1 = Real GDP of Year 1 (in Year 1 prices) =\$180 + \$20=\$200: Nominal GDP of Year 2 = Real GDP of Year 2 (in Year 2 prices) =\$400 + \$60=\$460: Real GDP of Year 2 (in Year 1 prices) =\$240 + \$50=\$290: Real GDP of Year 1 (in Year 2 prices) =\$300 + \$24=\$324: Calculating the ratios of real GDP in Year 2 to real GDP in Year 1, using Year 1 and Year 2 as the base year respectively. real GDP of Year 2 (in Year 1 price\$290 g1▯ = =1:45: real GDP of Year 1 (in Year 1 price\$200 real GDP of Year 2 (in Year 2 price\$460 g2▯ = =1:4198: real GDP of Year 1 (in Year 2 price\$324 The chain-weighted ratio of real GDP in Year 2 to real GDP in Year 1, denoted by c , is the geometric averag1 of g2and g . p p gc▯ g1▯ g2= 1:45 ▯ 1:4198=1:4348: AP/ECON2400A (Fall 2012) W.Ho { Example 2 2 Using the chain-weighting method, we have real GDP of Year 2 (in Year 1 dollars) =g ▯ rcal GDP of Year 1 (in Year 1 dollars) =1:4348 ▯ \$200=\$286:96; real GDP of Year 1 (in Year 2 dollars) =real GDP of Year 2 (in Year 2 dollars)=g c \$460 = =\$320:60: 1:4348 For every two consec
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