Nominal & Real GDP

Nominal GDP

• Value of output produced in current prices

Real GDP

• Value of output produced in constant or base year prices
• Adjusted for inflation

Base Year

• Either the earliest year or given
• Nominal = Real when it is base year
• After; Nominal > Real
• Before: Real > Nominal

GDP Deflator

• Price Index used to adjust from Nominal to Real
• Base Year: Deflator = 100
• After: Deflator >100
• Before : Deflator < 100
• Calculated by (Nominal / Real) x 100

Consumer Price Index

• Common measure of inflation; measures cost of market basket of goods for average family
• Calculated by:
• (Market $ in given year/Market $ in base year) x 100

Inflation

• Calculated by:
• (New PI - Old PI)/(Old PI) x 100