ECON 2 Lecture Notes - Lecture 9: Gdp Deflator
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Never calculate growth in gdp using nominal (example: only using 2013 prices. Index > 1: nominal > real and quantities) Rarely used in this form; generally we use index to convert nom to real. Index = nominal gdp/real gdp: consumer price index: the cost of buying a basket of goods and services in the current year divided by the cost of the same basket in the base year. Real cost = nominal cost/cpi: gdp and the price level are more often quoted in growth rates, which is defined as a percentage change. Inflation rate: the percentage change in a price index.
