Download Calculating Real GDP

Chapter2
National-Income Accounting:
Gross Domestic Product and the Price Level
Macroeconomics - Barro
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Nominal GDP
• Nominal GDP measures the dollar (or
euro, etc.) value of all the goods and
services that an economy produces during
a specified period, such as a year.
– Flow variable - it measures the dollar amount
of goods produced per unit of time, such as a
year.
– GDP in current dollars
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Real GDP
• Calculating Real GDP
– Multiply each year’s quantity of output of each
good by the price of the good in a base year.
– GDP in constant dollars
– Chain-weighted real GDP
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Calculations
• (nominal GDP)/(implicit price level) = real GDP
or
• implicit price level = (nominal GDP)/(real GDP)
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GDP as a Welfare Measure
GDP does not:
• Consider change in income distribution
• Include non-market goods.
• Assign value to leisure.
• Consider environmental damage.
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GDP by Expenditure
• Personal Consumption Expenditures
• Gross Private Domestic Investment
• Government purchases of Goods and
Services
• Exports and Imports
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Measuring GDP by Income
• National Income – Income earned by
factors of production.
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Relationship between GDP and
National Income
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National Income by Sector
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Prices
• Consumer Price Index (CPI)
• Producer Price Index (PPI)
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