# Intro to Price index.

## Presentation on theme: "Intro to Price index."— Presentation transcript:

Intro to Price index

Units of Price Nominal Real Price Year output per unit GDP GDP Index
refer to the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year. Units of Price Nominal Real Price Year output per unit GDP GDP Index \$2 Compute (a) nominal GDP for years 1 thru 5 (b) real GDP for year 4 (c) if year 2 is the base year, give the price index for years through 5

The formula Nominal means current Nominal GDP = Price X Output

Units of Price Nominal Real Price Year output per unit GDP GDP Index
refer to the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year. Units of Price Nominal Real Price Year output per unit GDP GDP Index x \$ \$32 x x x x Compute (a) nominal GDP for years 1 thru 5 (b) real GDP for year 4 (c) if year 2 is the base year, give the price index for years through 5

Units of Price Nominal Real Price Year output per unit GDP GDP Index
refer to the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year. Units of Price Nominal Real Price Year output per unit GDP GDP Index \$ \$32 Compute (a) nominal GDP for years 1 thru 5 (b) real GDP for year YIIIIKES!!!!!!!!!!! (c) if year 2 is the base year, give the price index for years through 5

Units of Price Nominal Real Price Year output per unit GDP GDP Index
refer to the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year. Units of Price Nominal Real Price Year output per unit GDP GDP Index \$2 / Compute (a) nominal GDP for years 1 thru 5 (b) real GDP for year 4 (c) if year 2 is the base year, give the price index for years through 5

Units of Price Nominal Real Price Year output per unit GDP GDP Index
refer to the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year. Units of Price Nominal Real Price Year output per unit GDP GDP Index \$2 / Compute (a) nominal GDP for years 1 thru 5 (b) real GDP for year 4 (c) if year 2 is the base year, give the price index for years through 5

The formulae Price Index = nominal price / base year price (times 100)
in this case (3/3 = 1) X 100 = 100 Real GDP = nominal GDP / the index (in hundreds)

Units of Price Nominal Real Price Year output per unit GDP GDP Index
refer to the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year. Units of Price Nominal Real Price Year output per unit GDP GDP Index \$2 / Compute (a) nominal GDP for years 1 thru 5 (b) real GDP for year 4 (c) if year 2 is the base year, give the price index for years through 5

Units of Price Nominal Real Price Year output per unit GDP GDP Index
refer to the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year. Units of Price Nominal Real Price Year output per unit GDP GDP Index \$2/3 / /3 /3 /3 Compute (a) nominal GDP for years 1 thru 5 (b) real GDP for year 4 (c) if year 2 is the base year, give the price index for years through 5

Units of Price Nominal Real Price Year output per unit GDP GDP Index
refer to the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year. Units of Price Nominal Real Price Year output per unit GDP GDP Index \$2/ / / / / Compute (a) nominal GDP for years 1 thru 5 (b) real GDP for year 4 (c) if year 2 is the base year, give the price index for years through 5

Units of Price Nominal Real Price Year output per unit GDP GDP Index
refer to the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year. Units of Price Nominal Real Price Year output per unit GDP GDP Index \$2/ \$ / / / / Compute (a) nominal GDP for years 1 thru 5 (b) real GDP for year 4 (c) if year 2 is the base year, give the price index for years through 5

Units of Price Nominal Real Price Year output per unit GDP GDP Index
refer to the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year. Units of Price Nominal Real Price Year output per unit GDP GDP Index \$2/ \$32/ \$ / / / / / / / / Compute (a) nominal GDP for years 1 thru 5 (b) real GDP for year 4 (c) if year 2 is the base year, give the price index for years through 5

Units of Price Nominal Real Price Year output per unit GDP GDP Index
refer to the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year. Units of Price Nominal Real Price Year output per unit GDP GDP Index \$2/ \$32/ \$ / / / / / / / / Compute (a) nominal GDP for years 1 thru 5 (b) real GDP for year 4 (c) if year 2 is the base year, give the price index for years through 5

Did I use a calculator? No
I cheated, or used a short cut while the index is 166.6, in hundreds it is 1.66 so the fraction value is 5/3 - I just inverted and multiplied 180 X 3/5 3 X 180 = 540 and 540 / 5 = 180

Units of Price Nominal Real Price Year output per unit GDP GDP Index
refer to the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year. Units of Price Nominal Real Price Year output per unit GDP GDP Index \$2/ \$32/(2/3) \$ / / / /(4/3) / /(5/3) / / Compute (a) nominal GDP for years 1 thru 5 (b) real GDP for year 4 (c) if year 2 is the base year, give the price index for years through 5