GDP & CPI Flashcards
What is Nominal GDP?
The actual dollar value of all goods and services produced in a year.
What is Real GDP?
Real GDP is Nominal GDP adjusted for inflation (ie. measured at constant prices). This measure allows comparison of changes in the value of the national output without price changes effecting the data.
What is the best measure of the rate of economic growth ?
The Percentage Change in real GDP.
How can we compare average incomes between country’s of different sizes?
GDP per capita (Real GDP divided by Population)
What is the consumer price index?
A number that shows the average price of a basket/collection of goods or services in one year in relation to its base year. Allowing for comparision of changes in price through one figure (Using CPI). A basket / collection might be 700 different products NZ’ers buy.
CPI is a weighted index which means the change in some goods or services hold more weight than others such as rent and petrol.
How is the inflation rate calculated?
The percentage change in CPI (Consumer Price Index)
Outside of Real/Nominal GDP and CPI what are some other indications of price?
Producer price index (PPI), Capital Goods Price Index (CGPI), Farm Goods Price Index (FGPI)
What are the limitations of using GDP (Gross Domestic Product) as a measure of the overall economy?
GDP does not account for unpaid work (DIY work, volunteers or housewives), Illegal or black market transactions (has no record), under the table payments such as flea markets or unrecorded cash payments.
