Nominal GDP (P x Q)
- Value of output produced in current year prices.
- Can increase from year to year if output increases or prices increase.
- Value of output produced in constant base year prices that is adjusted inflation
- Can increase from year to year only if output increases
- In the base year current prices equal constant
- In years after the base year Nominal GDP exceeds real GDP
- In years before the base year real GDP exceeds Nominal GDP
- Price Index used to adjust from nominal to real GDP
- In the base year the GDP Deflator is always equal to 100
- For Years after the base year GDP Deflator is greater than 100
- For Years before the base year GDP Deflator is less than 100
- Nominal/Real GDP X 100
Consumer price index
- Measures the Cost of a market basket of goods for a typical urban american family.
- Cost of Market Basket of goods in a given year/Cost of a market of goods in the base year x 100
Why does the nominal GDP increase faster than the real GDP? Also the real GDP is more accurate than nominal because it uses constant prices. I like the layout of your notes and it's very easy to read
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