Downloaded 27 times
Uploaded byGale Pooley
GDP Deflator
Inflation is caused by printing money faster than producing goods, which leads to rising prices over time. Real GDP accounts for inflation and uses a base year for prices, while nominal GDP uses current prices. The GDP deflator is used to calculate real GDP and inflation rates by adjusting nominal GDP for changes in prices.
In this document
Powered by AI
Discusses the cause of inflation as printing money faster than goods production, leading to rising prices.
Introduces nominal and real GDP, emphasizing the importance of a base year for real GDP evaluation.
Describes real GDP using constant prices versus nominal GDP, which reflects current prices.
Shows the formula for GDP deflator: Nominal GDP divided by Real GDP multiplied by 100.
Illustrates changes in total and percentage for pizza and soda prices and quantities over the years.
Presents the formula for calculating GDP inflation rate using GDP deflator values from two consecutive years.
More Related Content
GDP Deflator
- 1. Inflation Cause: Printing money faster than making goods Effect: Rising prices
- 3. Nominal vs. Real Real Real
- 4. Nominal Current prices Currentquantity Current quantity Current quantity
- 5. Real will always have a base year a base year a base year
- 6. Real Constant prices Current quantity Currentquantity Current quantity
- 7. GDP Deflator Nominal GDP = x 100 Real GDP
- 8. Real versus NominalGDP Pizza Soda Total % Year Price Qty Total Price Qty Total Total Change 2010 25 100 2500 5 50 250 2750 2011 35 134 4690 6 40 240 4930 79.3% 2011* 25 134 3350 5 40 200 3550 29.1% 2012 45 150 6750 7 30 210 6960 41.2% 2012* 25 150 3750 5 30 150 3900 9.9% * Prices adjusted to 2010 Rates
- 9. GDP Inflation Rate = x 100 GDP Delflator Year 2 - GDP Delflator Year 1 GDP Delflator Year 1
- 10. GDP Inflation Rate = x 100 GDP Delflator Year 2 - GDP Delflator Year 1 GDP Delflator Year 1