February 02, 2017 & February 03, 2017

 Real and   Nominal GDP Notes: 

Focus Question: 
1.  The "G" term in C + Ig + G + X and includes all of the following  except:
      b.)  social Security checks received by retirees.

2.  If waitresses and taxi drivers do not report all of their income to the government GDP will be understated. This is  because the unreported income
     b.)  is part of the underground economy

 Focus Question:
1.  Included
2.  Included
3.  Excluded
4.  Included
5.  Excluded
6.  Excluded
7.  Included
8.  Included
9.  Excluded
10. Included


 What is nominal GDP?

•  It is the value of output produced in current prices. 
•  It can increase from year to year if their output or prices increase. 
•  Current prices 
•  Formula for nominal GDP: 
•  Price x Quantity 

 What is real GDP? 

•  It is the value of output produced in constant based year prices. 
•  Base your prices remain constant. 
•  It is adjusted for inflation. 
•  Formula for real GDP: 
•  Base price x Quantity 
•  It can increase from year to year. 

 What are some key tips  you need to know? 

•  Measure of economic growth = real GDP 
•  Only in base year does real GDP equal nominal GDP.   
•  In years after base year nominal GDP will exceed real GDP. 
•  In years before base year real GDP will exceed nominal GDP. 
•  The base year is normally the earliest year, if not it is given. 

 What is GDP deflator? 

•  It is the price index that is used to adjust from nominal GDP to real GDP. 
•  Formula to find GDP deflator:
•  Nominal GDP /  Real GDP x100 

 What is consumer price index (cpi)? 

•  It measures inflation by tracking changes in the price of a market basket goods. 
•   Basket goods include things such as trucks, cars, motorcycles etc. 
•  Formula to find consumer price index :
•  Price of  market basket in current year / price of Market Basket in base year x 100

 Examples on how to find nominal GDP and real GDP: