Entrance Ticket How is it possible that one economist can say that GDP increased from one year to the next while another says it decreased and BOTH are right?

Agenda 1) Go Over GDP Shortcomings 2) Real vs. Nominal GDP 3) GDP Practice 2 4) Exit Ticket

GDP Shortcomings

Real vs. Nominal GDP

Key Definitions Nominal GDP – The value of all final goods based on the prices existing during the period of production Real GDP – The value of all final goods produced during a given period based on the prices existing in a selected base year GDP Deflator – A measure that compares changes in the prices of all final goods during a given year to the prices of those goods in a base year

Using the GDP Deflator A GDP deflator >100 means that, on average, prices have risen since the base year and the purchasing power of the dollar has decreased A GDP deflator < 100 means prices have fallen and purchasing power has increased since base year A GDP deflator = 100 means that prices and purchasing power are same as base year

GDP Practice 2

In-Class Problems Complete the problems independently as they will be judged for accuracy Sharing answers is not allowed

Exit Ticket Return to the entrance ticket and answer using your knowledge of real GDP and nominal GDP