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datdude666 datdude666
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Posts: 75
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11 years ago
i know that the deflator is equal to nominal over real. but neither real gdp nor gdp deflator is given. please help.
Hi. I don't get how the Consumer Price Index got incorporated into the equation.
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wrote...
11 years ago
The CPI is going to give you the basis year, that way you can calculate in terms of 2008 dollars vs 2009 dollars vs 2010 dollars..

Here is an example:

Nominal GDP Growth vs. Real GDP Growth
GDP, or Gross Domestic Product is the value of all the goods and services produced in a country. The Nominal Gross Domestic Product measures the value of all the goods and services produced expressed in current prices. On the other hand, Real Gross Domestic Product measures the value of all the goods and services produced expressed in the prices of some base year. An example:
Suppose in the year 2000, the economy of a country produced $100 billion worth of goods and services based on year 2000 prices. Since we're using 2000 as a basis year, the nominal and real GDP are the same. In the year 2001, the economy produced $110B worth of goods and services based on year 2001 prices. Those same goods and services are instead valued at $105B if year 2000 prices are used. Then:

Year 2000 Nominal GDP = $100B, Real GDP = $100B
Year 2001 Nominal GDP = $110B, Real GDP = $105B
Nominal GDP Growth Rate = 10%
Real GDP Growth Rate = 5%
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