(2-1-16) Unit II Net Domestic/National Product

Net Domestic/National Product

Net Domestic Product- GDP - depreciation

Net National Product- GNP - depreciation

GNP- GDP+Net foreign factor payment

Real GDP- value of output produced in constant base year prices:can increase from year to year only if output increase;adjusted for inflation

Nominal GDP- value of output produced in current pries:can increase from year to year if either output or price increase

Note-Measure Economy use Real GDP Measure Price Increase "Inflation" use Nominal GDP

Note- the formula for both is P(price) x Q(quantity) Base year:earliest year

GDP Deflator- Price Index used to adjust Nominal to Real GDP; in Base year GDP deflator = 100 in years after base year GDP is > 100 in years before base year GDP <100 Formula- Nominal GDP/Real GDP x 100

Consumer Price Index (CPI) - Most commonly used measurement of inflation Formula- price of market basket in a yr./price of same market basket in the base yr. x 100 

Inflation- GDP deflator (current [new] yr.) - GDP deflator (old yr.)/GDP deflator (old yr.) x 100