ECON 2202 Lecture 4: Ch1.2-3 Nominal and real price index; Savings
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1.2 Nominal and real price index
Two ways to compute the real GDP:
Fixed base year method
1.
[diminish the influence of price changes]
GDP deflator: Nominal GDP/ Real GDP * 100
Good
Year1
Year2
Q
P
Q
P
apple
50
1.00
80
1.25
orange
100
0.80
120
1.60
Nominal GDP:
Y1: 50*1.00+100*0.80=130
Y2: 80*1.25+120*1.60=292
Suppose: choose year 1 as base year
Use the price of base year and the quantity of current year
Real GDP:
Y1: 50*1.00+100*0.80=130
Y2: 80*1.00+120*0.80=176
GDP deflator:
Y1: 130/130 *100 = 100
Y2: 292/176 *100 = 165.9091
Price change: (165.9091-100)/100=65.91% = inflation rate
The chain-weight method
2.
No base year
Come up with a price and use for both year.
Lecture1
Tuesday, September 11, 2018
11:03 AM