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# Shortcomings of GDP Leisure Time Improved Product Quality

## Presentation on theme: "Shortcomings of GDP Leisure Time Improved Product Quality"— Presentation transcript:

Shortcomings of GDP Leisure Time Improved Product Quality
Trade-offs on the Environment Distribution of Output

What makes GDP go up? Nominal GDP Current output x current prices
A country produces more goods and services Goods and services cost more Nominal GDP Current output x current prices 4. Real GDP Current output x a base year price (price becomes constant) 5. To measure GDP at constant prices one needs a couple of things

1. A Base Year The year with which other years are compared to when using a price index 2. Price Index A measurement that shows how the average price of a group of goods changes over time \$55 June \$62 October

Let’s take inflation out of GDP
The GDP Deflator is a price index number GDP Deflator = price of goods in a specific year price of goods in the base year x100 Nominal GDP Real GDP x 100 = GDP Deflator

This would also make sense…
Nominal GDP Index # = Real GDP

Assume the following: Year houses built price nominal GDP Real GDP GDP Deflator \$100,000 \$115,000 \$125,000 Can you calculate Nominal GDP, Real GDP, and the Deflator? Not yet. “01 is the base year = \$300,000 \$345,000 86.9 x 300/345

Year houses built price nominal GDP Real GDP GDP Deflator
x \$100, \$300, \$345, \$115,000 \$125,000

Year houses built price nominal GDP Real GDP GDP Deflator
x \$100, \$300, \$345, x \$115,000 = \$460, \$460, \$125,000

Year houses built price nominal GDP Real GDP GDP Deflator
x \$100, \$300, \$345, x \$115,000 = \$460, \$460, x \$125,000 = \$625, \$575,

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