1. GDP that is measured at current prices is called GDP that has been adjusted for any price changes over time is called Let’s see how it works through one more example NOMINAL GDP. REAL GDP.

2. Nominal GDP Vs. Real GDP 1.Calculate the Nominal GDP for both years. 2.Calculate the Real GDP using prices from 2010. 3.By what percent did Nominal and Real GDP grow? YEARiPhonesApples Qty.PriceQty.Price 2010100¥4,000500 kgs. ¥ 25 / kg 2011120¥ 5,000600 kgs. ¥ 30 / kg NOMINAL GDP = (100 x 4,000) + (500 x 25) = ¥ 412,500 = (120 x 5,000) + (600 x 30) = ¥ 618,000 REAL GDP (using 2010 Prices) = (100 x 4,000) + (500 x 25) = ¥ 412,500 = (120 x 4,000) + (600 x 25) = ¥ 495,000 Growth ¥ 205,500¥ 82,500 Growth Rate = 205,500 x 100 412,500 = 49.8% = 82,500 x 100 412,500 = 20 %

3. Comparing Real GDP Real GDP growth Annual growth % 2003 2004 2005 2006 2007 2008 2009 2010 Australia 4.2 3.0 3.1 3.6 3.8 1.4 2.3 2.6 UK 2.8 3.0 2.2 2.8 2.7 -0.1 -4.9 1.4 Korea 2.8 4.6 4.0 5.2 5.1 2.3 0.3 6.2 Japan -0.2 1.2 0.8 3.4 2.7 1.0 -4.7 3.6 USA 2.5 3.6 3.1 2.7 1.9 0.0 -2.7 2.9 Germany 0.2 1.2 0.8 3.4 2.7 1.0 -4.7 3.6

4. What countries are represented in this? 8 million For every 1 person in Switzerland, there are 100 people in China Wait a minute…..China’s GDP should be more than Switzerland because it has more people that Switzerland…..CHECK THIS OUT? 1.3 billion

5. So how much output is each person in China producing on average? Real GDP per capita of a country is the GDP of a country divided by the total population of the country. REAL GDP PER CAPITA = REAL GDP POPULATION

6. 1.3 billion OUTPUT PER PERSON!!!! 8 million 1.3 billion 8 million