What is nominal GDP? What is real GDP? What is included in each? Why are these measures important? What do they tell us? What was GDP for the last two years (taken from the BEA)?© BrainMass Inc. brainmass.com October 17, 2018, 3:32 am ad1c9bdddf
Nominal and Real GDP:
Gross domestic product is the sum of values of goods and services produced over a certain period of time by a region mostly a country (Gross Domestic, 2010). It is used to indicate products and services generated from a specific territory and do not include income received over the period. Gross domestic product can be used to determine a country's national income and also its economic output.
The difference between nominal GDP and real GDP is that nominal GDP considers the total amount of money used on gross domestic product while real GDP does not factor in effects of inflation when determining gross domestic product (Gross Domestic, 2010). Values provided in nominal GDP are expressed in current market prices while values in real GDP eliminate changes in price due to deflation or inflation by using prices of some base year.
Factors of GDP:
The first component of gross domestic product is personal consumption which consists of household purchases involving durable and non durable goods and services. Factors of GDP (2011) provide that personal consumption expenditure is the highest component of gross ...
Nominal and Real GDP are clarified in this solution.
Reason Nominal GDP is greater than the Real GDP
Visit the Bureau of Economic Analysis Web site, http://www.bea.gov, and access the BEA interactively by selecting National Income and Product Account Tables. Select Frequently Requested NIPA Tables, and use Tables 1.1 and 1.2 to identify the GDP (nominal GDP) and real GDP for the past four quarters. Why was nominal GDP greater than real GDP in each of those quarters? What were the percentage changes in nominal GDP and real GDP for the most recent quarter? What accounts for the difference?
Reason for Nominal GDP is greater than the Real GDP
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