ECON 2400 Lecture Notes - Lecture 5: Final Good, Canadian Dollar, Gdp Deflator
Document Summary
Recall: read gdp is the gdp at base year price. Gdp at current (2013) prices is called nominal gdp for 2013. Gdp at base year (2011) prices is called real gdp/ gdp at constant prices/dollar. Hence (price for gdp/gdp deflator) =nominal gdp/real gdp (midterm) Gdp deflator is an index of the prices of goods/services that were produced in the economy. Problem when using gdp deflator: notice gdp deflator is price of all goods and services produced in the economy. Average canadian only interested in prices of goods and services they consume (cpi): some of the goods produced are not consumed by household. They may be exported or purchased by firms or government: some households may purchase imported goods. Hence cpi is more important than gdp deflator for household: how to calculate cpi. Statistics canada makes a basket of expenditure and keeps it fixed within the same base year period.