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Real GDP is an example of the distinction between real and nominal values in economics.Nominal gross domestic product is defined as the market value of all final goods produced in a geographical region, usually a country; this depends on the quantities of goods and services produced, and their respective prices.
Mathematically, the LM curve is defined by the equation / = (,), where the supply of money is represented as the real amount M/P (as opposed to the nominal amount M), with P representing the price level, and L being the real demand for money, which is some function of the interest rate and the level of real income. An increase in GDP shifts the ...
The nominal GDP of a given year is computed using that year's prices, while the real GDP of that year is computed using the base year's prices. The formula implies that dividing the nominal GDP by the real GDP and multiplying it by 100 will give the GDP Deflator, hence "deflating" the nominal GDP into a real measure. [1]
If for years 1 and 2 (possibly a span of 20 years apart), the nominal wage and price level P of goods are respectively nominal wage rate: $10 in year 1 and $16 in year 2 price level: 1.00 in year 1 and 1.333 in year 2, then real wages using year 1 as the base year are respectively: $10 (= $10/1.00) in year 1 and $12 (= $16/1.333) in year 2.
[1] [2] Successive updates have added countries (currently 183), years (1950-2019), and data on capital, productivity, employment and population. [3] The current version of the database, version 10, thus allows for comparisons of relative GDP per capita , as a measure of standard of living , the productive capacity of economies and their ...
The most popular criticism of national accounts is made against the concept of gross domestic product (GDP). In part, this criticism of GDP is misplaced, because the fault is not so much with the concept itself. It is useful to have a measure of a country's total net output, and its changes over time – that's better than having no measure at all.
Although the net national product is a key identity in national accounting, its use in economics research is generally superseded by the use of the gross domestic or national product as a measure of national income, a preference which has been historically a contentious topic (see e.g. Boulding (1948) [3] and Burk (1948) [4]).
[2] [3] Macroeconomists study topics such as output/GDP (gross domestic product) and national income, unemployment (including unemployment rates), price indices and inflation, consumption, saving, investment, energy, international trade, and international finance. Macroeconomics and microeconomics are the two most general fields in economics. [4]