L> Measuring the Economy Chapter 7 - Measuring Domestic Output and NationalIncomeMeasuring the Economy What you have to know: Define GDP. Why is GDP a "monetary measure"? What are "double counting", "intermediate goods", and "final goods"? What is had in GDP and what is excluded? How to calculate GDP using the expenditures strategy. GDP = C + Ig + G + Xn How to calculate net exports (Xn) What is included in Gross Private Domestic Investment (Ig) Define and also calculate Net Private Domestic Investment (In) In = Ig - depreciation What it implies as soon as Net Private Domestic Investment is positive, zero, and also negative. How to calculate National Income NI = Wages + Rents + Interemainder + Corp. Profits + Prop. Income Define and also calculate Net Domestic Product (NDP) NDP = GDP - depreciation NDP - C + In + G + Xn Define National Income (NI) Define Personal Income (PI) Define Disposable Income ((DI) Define nominal GDP Define and calculate real GDP genuine GDP = nominal GDP / (GDP Price Index/100) Know the difficulties (shortcomings) of using GDP as a measure of social welfare (just how well the economic situation is doing) and also whether, because of them, GDP tends to OVERstate or UNDERstate social welfare IntroductionWe"ve been making use of the AS - ADVERTISEMENT version to understand also the macroeconomy. The vertical axis actions the PRICE LEVEL which is the average level of prices in an economy. The horizontal axis measures REAL DOMESTIC OUTPUT which is all the goods and solutions produced in an economy. But WHAT NUMBERS do we put on the axes? How execute we measure the price level and also genuine domestic output? We meacertain actual residential output through REAL GDP and we measure the price level via a PRICE INDEX. In this lesson we"ll learn exactly how to calculate actual GDP and also a price index.Measuring Real Domestic Output: actual GDP We will use "real GDP" to meacertain real domestic output - the full amount of output developed in an economic situation . The table listed below lists the GDP for a few countries. NOTE: 2007 information Populations: US: 303 million Japan: 128 million Germany: 82 million China: 1,324 million UK: 60 million France: 61 million Italy: 59 million Canada: 32 million Brazil: 192 million India: 1,158 million S. Korea: 48 million Mexico: 112 million Australia: 20 million Note, that if you wish to COMPARE countries you should usage GDP PERCAPITA which is GDP divided by the country"s population (GDP perperson). Even though the USA has the world"s largest GDP,it is not the greatest GDP per capita. For a table of GDP per capitasee: http://www.nationmaster.com/graph/eco_gdp_percap-economy-gdp-per-capitaDefinition: GDPGross Domestic Product is the total sector worth of all last goods and solutions that are developed in the economy in one year. This is one definition that need to be memorized. As you deserve to watch it has three components. (1) "complete sector value" How can we add the number of structures developed to the variety of candy bars created to the variety of cars created, and so on.? To perform this we require a widespread unit of meacertain. The unit of meacertain for real residential output or actual GDP is the sector value or money To get the "total" industry worth then one would certainly think that you would certainly add up the price times the amount of every little thing produced: GDP = SUM P x Q GDP = P this year x Q this year GDP amounts to the sum of the prices times amounts of every little thing produced in a year This, then, would certainly offer you the full sector worth of whatever produced. (2) "last items and also services" Only last goods and services are had to avoid double counting Final products are bought and also supplied by the last consumer. When you buy a hamburger from McDonald"s the worth of the hamburger must be consisted of in GDP because it is a final good. Intermediate goods are bought so that they can be resold or additionally processed. When McDonald"s buys buns, ground beef, and also ketchup, the worth of these purchases of intermediate items are NOT included to GDP considering that they will be included once a customer buys the hamburger (a last good). If we contained the price of the hamburger AND the value of the bun, ground beef, and also ketchup then these would certainly be counted twice. Anvarious other way to stop double counting is to use the value-added strategy and just include what McDonald"s spends on buns, ground beef, and ketchup, however then NOT include what consumers spfinish on the hamburger. The suggest is we want to obtain a measure of the sector worth of the last goods that an economic situation produces. (3) "created in one year" GDP is a measure of what is created or made in one year, therefore: a. secondhand sales are not contained bereason nothing new is developed, and b. financial transactions not contained bereason nopoint is developed A vehicle produced in 1999 is included in 1999"s GDP. Thus, if a provided 1999 auto is marketed in the year 2001 we would NOT aacquire include its price in the GDP for 2001 considering that it was not produced then. We WOULD include the revenues earned by the provided vehicle salesperkid in 2001 because he or she did clean, advertise, and offer the provided car in that year, however we would not include the value of the 1999 car itself. Also, a lot of the "organization news" that you hear concerning the billions of dollars invested on stocks and bonds each day does not affect the GDP straight. When people buy stocks and bonds from whom carry out they buy them? If I buy $100 of stock in IBM, from whom perform I buy it? I may buy it via a stock broker, however whose stock carry out I buy? I probably didn"t buy it from IBM (unmuch less it was an IPO - Initial Public Offering), yet rather I bought it from somebody who had bought it earlier. In various other words, I bought "used" stock. But the major allude is, when I buy $100 on IBM stock, nothing is being created so the $100 is not included to GDP. REVIEW: (Textbook Inquiry 7-13) Which of the adhering to are actually had in this year’s GDP? Exordinary your answer in each situation. a. Interemainder on an AT&T corporate bond. b. Social defense payments obtained by a reexhausted factory worker. c. The unpaid solutions of a household member in painting the household residence. d. The revenue of a dentist. e. The money got by Smith when she sells her economics textbook back to the bookkeep. f. The monthly allowance a college student receives from home. g. Rent got on a two-bedroom apartment. h. The money received by Josh when he resells his current-year-version Honda vehicle to Kim. i. The publication of a college textbook. j. A 2-hour decrease in the size of the workweek. k. The purchase of an AT&T corporate bond. l. A $2 billion increase in business inventories. m. The purchase of 100 shares of GM prevalent stock. n. The purchase of an insurance policy. ANSWERS are at the bottom of this webpage. Circular Flow ModelThe circular circulation version can aid us to understand also the twoapproaches used to meacertain GDP.1. expenditures strategy 2. revenue approachArrow # 3 is actual GDP (items and services produced). This isoutput produced by company and also sold in the product markets toconsumers (households). This is what we want to meacertain. This is realdomestic output. This is GDP. To measure this level of produced output we have the right to meacertain arrowhead #4which are the expenditures invested on this output. This is theEXPENDITURES APPROACH. If something is produced and also sold the amountsold need to equal the amount created. The only problem with this iswhat happens if somepoint is created one year yet not marketed in thefollowing year? If we simply added up the sector worths of items andsolutions that were offered these items would be consisted of in the wrongyear. To handle this trouble we incorporate items developed one year andsold the next as changes in company inventories which ARE includedthe year that they are created.We deserve to likewise measure arrow #1 which is the earnings earned byhouseholds as soon as they market their resources (arrow #2) to businesses.The worth of output produced (GDP) is equal to the value of ALL theincome earned by everyone who had anything to do via creating theoutput. If a $20,000 automobile is sold, then $20,000 was earned by everyonethat was connected in creating and marketing the automobile. So to meacertain GDP( the value of the commodities produced) we can sum up all the incomeearned in creating that level of GDP. This is the INCOME APPROACH tocalculating GDP.Expenditures Approach GDP = C + Ig + G + Xn KNOW THIS ! GDP = C + Ig + G + Xn1. personal consumption expenditures (C) includes durable items (lasting 3 years or more), nonsturdy goods and also solutions. 2. gross personal domestic investment (Ig) Remember that we defined investment as the "build-up of capital" and we characterized funding as "manufactured resources" so investment occurs when businesses buy resources. If a carpenter buys a hammer it is an investment. (Note: if an economist buys 100 shares of stock in Microsoft, it is NOT an financial investment.) Economic Investment includes: 1) all final purchases of machinery, equipment, and also tools by businesses 2) all building and construction (including homes) 3) alters in inventories (To include items created one year however sold the next. If businesses are able to sell even more than they presently produce, this entry will be a negative number. ) gross vs. net residential investment (In) Gross investment is ALL NEW INVESTMENT and includes the three items detailed over. Net investment contains just the CHANGES to the nation"s capital stock Each year as new products and services are being developed, some of the existing capital tools is wearing out and buildings are deteriorating. This is referred to as "depreciation" or "intake of addressed capital". Whereas gross investment adds to a country"s stock of resources, depreciation reduces a country"s stock of resources. Net investment = Gross Investment - depreciation In = Ig - depreciation Net investment is pertained to economic growth. If net investment is positive then the country ends up via even more funding at the finish of the year than it declared through. Since we recognize that economic growth is resulted in by gaining "even more resources", if net investment is positive then the economic situation is flourishing, ("broadening economy"). What kind of financial development is this (1) enhancing our potential from the 5Es or, (2) achieving our potential (or achieving complete employment)? It would be "increasing our potential" which is led to by obtaining even more resources, much better sources, and also better modern technology. If net investment is negative this indicates that depreciation is higher than gross investment, or even more resources wears out than is produced so we would have actually a "declining economy". If gross investment (all brand-new capital that is produced) EQUALS depreciation (resources that wears out) then net investment will certainly equal zero. tbelow will be no changes to amount of funding that a country has, and tbelow will be a "static economy". 3. government purchases (G) This consists of purchases by all levels of government (federal, state and local). Whenever before the federal government buys something or pays somebody it is contained in government purchases. Government purchases does NOT incorporate deliver payments. Transfer payments, by interpretation, are payments for which nothing is meant in rerotate. Government deliver payments encompass welfare and also social defense payments, transfers from the federal federal government to state government and from state to neighborhood governments. These are not included in GDP as government purchases bereason as soon as the government transfers money, NOTHING IS PRODUCED and also GDP only consists of manufacturing. Of course, when civilization on welfare spend their federal government inspect on food and also rent then this does enter GDP as consumption (C). 4. net exports (Xn) Net exports (Xn) consisted of the worth of all exports from a country minus the worth of all imports. Xn = X - M If a nation has a trade deficit then the value of imports is greater than the worth of a country"s exports and also net exports (Xn) is negative. It need to be apparent why exports is included in GDP and also it need to be obvious why imports need to NOT be included to GDP. But why execute we have to SUBTRACT imports from GDP. Subtracting is a lot various than not adding. Imports are subtracted from GDP bereason they were wrongly included in usage expenditures (C). Since imports are created in one more country they need to not be added to our GDP, however they are included as art of of intake so therefore they have to be rerelocated. Practice Problem Given the information listed below, use the EXPENDITURES APPROACH to calculate GDP. Use the data listed below to calculate the GDP of this economic climate making use of the expenditures strategy. All numbers are in billions. Personal intake expenditures $400 Government purchases 128 Gross exclusive domestic investment 88 Net exports 7 Net foreign element revenue earned in the UNITED STATE 0 Consumption of resolved capital 43 Instraight business taxes 50 Compensation of employees 369 Rents 12 Interemainder 15 Proprietors" earnings 52 Corporate income taxes 36 Dividends 24 Undispersed corpoprice earnings 22 ANSWER: Before scrolling down, pick up some paper and a pencil and also actually calculate GDP. DOING it yourself is much better than analysis it. . . . GDP = C + I + G + Xn . . From the table we get: GDP = C + I + G + Xn GDP = 400 + 128 + 88 + 7 GDP = C + I + G + Xn = 400 + 128 + 88 + 7 = $ 623 The Real World - the 2007 USA GDP: Income Approach --calculating national earnings (NI)A second way to calculate GDP is by adding up all INCOME - circulation #1 in the circular flow diagram listed below is the income received when resources are sold to businesses. Tright here are 4 kinds of sources (four determinants of production): labor land also capital entrepreneurial capacity Each of these resource forms receives what economist speak to INCOME when they are sold: labor receives wages land receives rent resources receives interest entrepreneurial ability receives revenues So if we include up: wages + rent + interemainder + profits we must acquire GDP -- well virtually. Actually we get something called National Income (NI), or the income EARNED by the resources. the textbook goes with the calculation on how to get from NI to GDP - yet we will not have to perform that in this course. What we will perform is divide the profits earned by entrepreneurs right into two types: proprietor"s revenue and also corpoprice earnings. So: NI = Wperiods + Rents + Interemainder + Corp. Profits + Prop. Income Definitions: nationwide income: all earnings earned by American supplied sources, whether below or awide, plus taxes on production and also imports. Compensation of employees contains weras, salaries, fringe benefits, salary and also supplements, and also payments made on befifty percent of workers prefer social protection and various other health and wellness and also pension plans. Rents: payments for giving residential property sources (readjusted for depreciation it is net rent). Interest: payments from exclusive organization to providers of money funding. Proprietors" income: earnings of integrated businesses, single proprietorships, partnerships, and cooperatives. Corporate profits: After corporate income taxes are paid to federal government, dividends are spread to the shareholders, and the remainder is left as undistributed corporate revenues (also referred to as maintained earnings). Practice Problem Given the information listed below, usage the INCOME APPROACH to calculate National Income (NI). Use the data listed below to calculate the GDP of this economic situation making use of the earnings strategy. All figures are in billions. Personal usage expenditures $400 Government purchases 128 Gross private domestic investment 88 Net exports 7 Net foreign factor earnings earned in the U.S. 0 Consumption of fixed resources 43 Instraight service taxes 50 Compensation of employees 369 Rents 12 Interemainder 15 Proprietors" income 52 Corporate revenue taxes 36 Dividends 24 Undispersed corpoprice revenues 22 ANSWER: Before scrolling down, pick up some paper and also a pencil and actually calculate GDP. DOING it yourself is better than analysis it. . . . NI = Wages + Rents + Interemainder + Corp. Profits + Prop. Income . . From the table we get: NI = Wperiods + Rents + Interemainder + Corp. Profits + Proprietor"s Income NI = 369 + 12 + 15 + 82 + 52 NI = Wages + Rents + Interest + Corp. Profits + Prop. Income Corporate profits are supplied for three different purposes: Corporate income taxes = 36 Dividends = 24 Unspread corpoprice revenues = 22 Corpoprice revenues then equal 36 + 24 + 22 = 82 . On the exams I will offer you "corpoprice profits". NI = 369 + 12 + 15 + 82 + 52 = $ 530 GDP = C + I + G + Xn = 400 + 128 + 88 + 7 = $ 623 As you deserve to check out, National earnings does not equal GDP. There are some expenditures (that are contained in the expenditures approach) that are not income (therefore not included in the revenue approach). They are instraight organization taxes ( 50), depreciation (43), and also net international earnings element ( 0 ), But, again, you won"t have to execute this in this course. Other Social Accounts Net Domestic Product (NDP) GDP - Depreciation = NDP National Income (NI) NI = Weras + Rents + Interest + Corporate Profits + Proprietor"s Income NI is earnings EARNED by the factors of manufacturing (resources). Personal Income (PI) PI is the income RECEIVED by the determinants of manufacturing (resources). To calculate, take NI minus payroll taxes (social defense contributions), minus corporate profits taxes, minus undistributed corpoprice profits, and also include transport payments. Disposable Income (DI) is your SPENDABLE income. DI is personal income minus personal taxes. The Real World - the 2007 USA GDP: REVIEW: 7-8 (Key Question) Below is a list of residential output and also nationwide revenue numbers for a given year. All numbers are in billions. The occurring concerns ask you to recognize the major nationwide earnings actions by both the expenditure and also income techniques. Answers acquired by each technique must be the exact same. a. Using the above information, identify GDP and NDP by the expenditure technique. b. Calculate National Income (NI) by the revenue method. Personal consumption expenditures.............. Net international variable revenue earned Transfer payments........................... Rents Consumption of solved capital (depreciation)....... Social defense contributions Interemainder....... Proprietors’ revenue Net exports.......................................... Dividends (part of corpoprice profits) Compensation of employees............. Instraight company taxes Undistributed corporate revenues (part of profits).... Personal taxes Corporate revenue taxes (component of corporate profits).... Corpoprice earnings Government purchases........ Net personal domestic investment Personal conserving....... ....$245 4 ....12 14 ....27 20 ....13 33 .....11 16 ....223 18 ....21 26 ....19 56 ......72 33 .......20 ANSWERS: a. Using the over data, determine GDP and also NDP by the expenditure technique. GDP = $388 GDP = C + Igross + G + Xn Igross = Inet + depreciation = 33 + 27 = 60 GDP = 245 + 60 + 72 + 11 = 388 NDP = $361 NDP + C + Inet + G + Xn NDP = 245 + 33 + 72 + 11 = 361 or NDP = GDP - depreciation NDP = 388 - 27 = 361 b. Calculate National Income (NI) by the revenue method. NI = $339 NI = wages + rents + interest + revenues profits = corpoprice profits + proprietor"s revenue earnings = 56 + 33 = 89 NI = 223 + 14 + 13 + 89 = 339 GDP and also Economic Well-BeingGDP per capita is frequently provided to meacertain a country"s well being orstandard of living. The higher the GDP per capita for a country thebetter off the country is. But tright here are some troubles through using GDPper capita to measure a country"s conventional of living.Problems through using GDP to Measure the Standard ofLiving:1. non-sector transactions are not contained in GDP 2. leisure rises the typical of living however it isn"t counted 3. improved product high quality often isn"t accounted for in GDP 4. GDP does not account for the complace output 5. GDP does not account for the circulation of output 6. increases in GDP might damage the atmosphere and decrease the typical of living 7. the underground economy produces products and also solutions yet they are not contained in GDP 8. GDP does not account for a feasible future decline in output as a result of resource depletion. 9. Nonfinancial Sources of Well-Being choose courtesy, crime reduction, and so on, are not covered in GDP. 10. We need to use per capita GDP to compare the living requirements of various nations. 1. non-industry transactions are not had in GDP GDP doesn’t meacertain some very advantageous output because it is unpassist (homemakers’ services, parental child treatment, volunteer initiatives, home innovation projects). Called non-sector transactions 2. leisure rises the conventional of living yet it isn"t counted GDP doesn’t measure enhanced living problems as a result of even more leicertain. 3. enhanced product top quality frequently isn"t accounted for in GDP GDP doesn’t meacertain renovations in product top quality unless they are had in the price 4. GDP does not account for the complace of output GDP provides no worth adjustments for alters in the composition of output. Nominal GDP ssuggest adds the dollar value of what is produced; it provides no distinction if the product is a semiautomatic rifle or a jar of baby food. 5. GDP does not account for the distribution of output GDP provides no value adjustments for changes in the circulation of income. Per capita GDP may give some hint regarding the loved one typical of living in the economy; yet GDP numbers execute not administer indevelopment about just how the earnings is spread. 6. rises in GDP may damage the setting and decrease the standard of living The harmful impacts of pollution are not deducted from GDP (oil spills, enhanced incidence of cancer, destruction of habitat for wildlife, the loss of a clear unobstructed view). GDP does incorporate payments made for cleaning up oil spills and also the expense of health care for cancer victims. 7. the underground economic climate produces products and also solutions however they are not included in GDP GDP does not include output from the Underground Economy. Illegal activities are not counted in GDP (estimated to be roughly 8% of U.S. GDP). Legal economic activity might likewise be part of the “underground,” normally in an initiative to avoid taxation. Illegal tasks are not counted in GDP (approximated to be around 8% of UNITED STATE GDP). Legal financial task might additionally be part of the "underground," generally in an initiative to stop tax. 8. GDP does not account for a possible future decrease in output due to resource depletion. 9. Nonfinancial Sources of Well-Being favor courtesy, crime reduction, etc., are not extended in GDP. 10. We should usage per capita GDP to compare the living standards of various nations. Which country has actually a higher GDP, Switzerland also or India? Which has actually a higher level of financial well-being: Switzerland: GDP: $239.3 billion (2003 est.) Population: 7,450,867 (July 2004 est.) GDP per capita: $32,700 (2003 est.) India: GDP: $3.033 trillion (2003 est.) Population: 1,065,070,607 (July 2004 est.) GDP per capita: $2,900 (2003 est.) GDP per capita = GDP / populace REVIEW: Do each of the adhering to reason GDP to OVERSTATE the economic wellness of a country or UNDERSTATE it? 1. non-sector transactions (Does GDP OVERstate or UNDERstate economic well-being?) not had so, GDP UNDERclaims wellness. 2. boosted product high quality (Does GDP OVERstate or UNDERstate economic well-being?) not accounted for, so GDP UNDERsays wellness. 3. more leisure (Does GDP OVERstate or UNDERstate financial well-being?) not accounted for, so GDP UNDERsays well-being. 4. the complace of output (Does GDP OVERstate or UNDERstate financial well-being?) if "bad" things are being created, then GDP OVERstates health. 5. the distribution of earnings (Does GDP OVERstate or UNDERstate economic well-being?) an unequal distribution of revenue would certainly result in GDP OVERstating the health of the majority of of a country"s populace 6. the underground economic situation (Does GDP OVERstate or UNDERstate financial well-being?) not accounted for, so GDP UNDERsays wellness 7. GDP and also the setting (Does GDP OVERstate or UNDERstate economic well-being?) harmful results of pollution and also expenses of contamination reduction are not deducted from GDP, so GDP OVERsays health. 8. Non-economic sources of wellness (Does GDP OVERstate or UNDERstate financial well-being?) not accounted for, so GDP UNDERclaims well-being 9. Resource depletion (Does GDP OVERstate or UNDERstate economic well-being?) GDP oversays wellness given that once we are depleting the sources our GP is high, yet in a future through fewer resources GDP will certainly be lower 10. per-capita revenue (Does GDP OVERstate or UNDERstate financial well-being?) GDP OVERstates well-being in nations through big populaces and UNDERstates well-being in countries via small populaces Measuring the Price Level and also genuine GDPIntroductionWe"ve been making use of the AS - AD design to understand also the macroeconomic situation.The vertical axis actions the PRICE LEVEL which is the average levelof prices in an economic situation. The horizontal axis procedures REAL DOMESTICOUTPUT which is all the goods and solutions created in aneconomic climate.But WHAT NUMBERS perform we put on the axes? How do we measure theprice level and real domestic output?We have actually checked out that we meacertain actual domestic output with REAL GDPand we have learned how to calculate GDP. In the lectureon joblessness and inflation we learned just how a PRICE INDEX isused to meacertain the price level. Now we will learn exactly how to usage a priceindex to calculate REAL GDP.Nominal GDP and real GDPNominal GDP is the market worth of all last goods and also solutions produced in a year. Nominal GDP is a (P x Q) figure consisting of the amount of eexceptionally item produced in the economic situation in one year times its price THAT year. Nominal GDP is calculated utilizing the existing prices prevailing when the output was created however real GDP is a figure that has been adjusted for price level changes. Nominal GDP = SUM (this year"s prices x this year"s quantities) = (P this year x Q this year) Therefore, if nominal GDP boosts is it bereason we are developing even more ( Q this year ) or is it because the Price Level boosted ( P this year) ? In truth it is feasible for nominal GDP to boost even though the amount created has DECREASED. How? Nom. GDP = (P this year x Q this year) IF prices boosted a lot, nominal GDP would boost also if the quantity developed went down. (P this year x Q this year ) = Nom. GDP So if we understand that nominal GDP has actually raised, we still carry out not understand if we are developing more (and also reducing scarcity) or if the price level has actually just enhanced. Real GDP is a measure of exactly how a lot was actually produced. That is why it is supplied on the AS/AD graph as a meacertain of real residential output (RDO). We meacertain RDO with actual GDP, not nominal GDP. We calculate real GDP by summing the amount produced of whatever in an economy times ITS PRICE IN A BASE YEAR. Since we constantly use the exact same base year prices if the amount produced boosts it will certainly increase actual GDP. Real GDP = SUM (base year"s prices x this year"s quantities) = P base year x Q this year By making use of the very same price level (base year prices) we remove the impacts of a higher price level (inflation) and if REAL GDP boosts we understand that the economic climate is developing even more and scarcity is being reduced.real GDP actual GDP = SUM P base year x Q specific year particular year"s quantities x base years prices Real GDP = SUM (base year"s prices x this year"s quantities) = P base year x Q this year By utilizing the exact same price level (base year prices) we remove the effects of a greater price level (inflation) and also if REAL GDP boosts we know that the economy is creating more and scarcity is being decreased. Calculating a price indexTo measure the price level we use a price index. A price index isa meacertain of the price level as a percent of the price level in aBASE year. This is various from inflation which is the price ofincrease in the price level from the PREVIOUS year.As you have actually review, to calculate a price index a year is schosen asa base year. The average level of prices for that year is assigned aworth of 100. Then the price levels for all other years arecalculated as a percent of the base year.GDP Price Index interpretation a price index is a meacertain of the price of a stated collection of goods and also services, called a "industry basket", in a given year as compared to the price of an the same (or highly similar) collection of goods and also services in a reference year (dubbed the "base year") calculating a GDP price index price index in a offered year = (price of industry basket in a certain year / price of exact same industry basket in base year) x 100 calculating actual GDP real GDP = Nominal GDP / Price Index Actually, you then need to multiply it by 100. real GDP = (Nominal GDP / Price Index) x 100 The following data display nominal GDP and the correct price index for a number of years. Compute real GDP for each year. In which year(s) was there a recession (decrease in actual GDP)?.

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All GDP are in billions. NominalPrice level YearGDPindexReal GDP 1$117120___ 2124104___ 314385___ 414996___ 5178112___ 6220143___ The answers are below: ANSWERS: NominalPrice level YearGDPindexReal GDP 1$117120$ 98 2124104119 314385168 414996155 5178112159 6220143154