Topic 16 - Measurement of Economic Performance (II)
Topic 16 - Measurement of Economic Performance (II)
2005 2012
Output Price Output Price
Rice 100 $20 100 $25
Shirts 1,000 $100 2,000 $150
Implicit GDP
Deflator = Nominal GDP
________________ X 100
or Real GDP
Price Index
Question (1):
Refer to Illustrations 1 and 2, calculate the GDP deflator in 2005 and 2012
respectively.
Implicit GDP deflator of the base year (i.e., 2005 in this e.g.) is ___________.
Question (2):
If the Price Index of the current year is 120, calculate the following expenditure at
constant market prices:
The process of finding the real GDP from nominal GDP is called GDP deflation.
Question (3):
GDP of Country A increased from $137,209 million in 2005 to $206,890 million in
2008. The price index of 2008 is 128.76. 2005 is the base year. Calculate the real
GDP for 2008 by using the above formula.
Question (4):
GDP of Country B increased from $500 billion in 2008 to $1,000 billion in 2009.
The price index of 2008 is 120 and that of 2009 is 95. Calculate the real GDP for
2009.
E. Growth Rates
‧ ‧ ‧
YN = p + YR
‧
where YN = nominal GDP growth rate
‧
YR = real GDP growth rate
‧
p = growth rate of prices
Question (5):
Fill in the blanks with correct figures.
‧ = ‧ + ‧
YN p YR
(1) ______ = 5% + 4%
(2) 3% = 5% + ______
(3) 3% = 3% + ______
Conclusion:
Hence, it is found out that:
If % in nominal GDP > % in prices real GDP _________
If % in nominal GDP < % in prices real GDP _________ -ve growth rate
If % in nominal GDP = % in prices real GDP _________
- Potential GDP, Yf
Potential GDP or full employment GDP is the value of final output produced
when ALL the country’s productive resources are fully utilized, holding
resources endowment and technology constant.
In other words, potential GDP is the maximum / minimum value of output
that can be produced with all the existing production factors, resources and
technology.
- Actual GDP, Y
Actual GDP refers to the value of output that is actually produced by the
resources utilized.
By definition, actual GDP can / cannot exceed potential GDP, since potential
GDP is the maximum / minimum value of output which can be produced.
However, actual GDP can / cannot be lower than potential GDP, and such
situation will result when some productive factors and resources are / are not
employed or utilized. In such case, ____________________ exists.
16.3 Factors Affecting the GDP (Refer to Topic 18 for further details.)
AD = C + I + G + NX
C = f( t, i, ……..)
t _____
i _____ C AD
where t = income taxes
i = interest rate
I = f( t, i, ……..)
t _____
i _____ I AD
where t = profits tax
i = interest rate
CONCEPT MAP
Real GDP growth rate = Real GDP of current year – Real GDP of previous year x 100%
Real GDP of previous year