Real And Nominal Measurements Flashcards
What is the misconception about economic performance, GDP, and quantity?
An economy does not perform dependant on the GDP of product, but instead the quantity produced
Why is it challenging to use prices to monitor total output?
The volumes of goods produced change and so too does their prices by inflation
What are nominal values?
Nominal values are measurements using prices that are current at the time a transaction takes place
What are real values?
Real values are the quantities produced after having removed the effects of price changes
What causes nominal GDP to increase?
Increase in output, Inflation
What is the price index? What is the equation?
Price index is the ratio of the nominal value of a variable to its real value and then multiplied by 100
100 *** (nominal GDP///real GDP)
How do you convert nominal percentage to a real value?
Subtract the rate of inflation from the nominal percentage change
