ECON 2400 Lecture Notes - Ator
4 Dec 2013
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Example 2: calculating real gdp and price indexes. An economy producing only two nal goods, x and y . Nominal gdp of year 1 = real gdp of year 1 (in year 1 prices) Nominal gdp of year 2 = real gdp of year 2 (in year 2 prices) Real gdp of year 2 (in year 1 prices) = + = . Real gdp of year 1 (in year 2 prices) = + = . = 1. 45. g2 real gdp of year 2 (in year 2 prices) real gdp of year 1 (in year 2 prices) The chain-weighted ratio of real gdp in year 2 to real gdp in year 1, denoted by gc, is the geometric average of g1 and g2. gc g1 g2 = Using the chain-weighting method, we have real gdp of year 2 (in year 1 dollars) = gc real gdp of year 1 (in year 1 dollars)
