Economist compute real GDP because different regions have varying price levels. Price levels reflect the value of money itself. If GDP is not accounted for the value of money, then nominal GDP results and it represents real production * its value in the local currency. Since not all currency is equal in value, this will overvalue some GDPs and undervalue others. Real GDP removes money from the equation and allows for direct comparison.
economists prefer to compare real gdp figures for different years instead of comparing nominal gdp figures. why?
Real GDP reflects output more accurately than nominal GDP by using constant prices.
economists follow the country's GDP and other key statistics to predict business cycles.
Growth rate, adjusted for inflation.
Economists follow the country's GDP and other key statistics to predict business cycles
economists prefer to compare real gdp figures for different years instead of comparing nominal gdp figures. why?
Real GDP reflects output more accurately than nominal GDP by using constant prices.
economists follow the country's GDP and other key statistics to predict business cycles.
Growth rate, adjusted for inflation.
Economists follow the country's GDP and other key statistics to predict business cycles
Real GDP calculations have been adjusted to factor in inflation. Nominal GDP calculations are not adjusted. It is harder to make valid comparisons across time if you don't adjust for price level differences.
if gdp is 719.1 and consumption is 443.8, how do i compute consumption as a percentage of gdp?
Nominal GDP does not tell much, but real GDP tells a lot. If the real GDP has fallen from one year to another, it means that the economy is in depression. If it grows, it shows that the economy is booming. If there is no change, the economy is stagnant (i.e. it did not grow).
Real GDP is a measure of the economic output of a country. The absolute measure only tells you what that output was for a particular period. The more important measure for employment is the difference between real GDP and a theoretical real GDP which economists use to calculate the maximum output of an economy. When the gap between real GDP and maximum output GDP is large, the unemployment rate will be large and vice versa.
GDP is the most accurate way to determine if the economy is performing well.
nominal GDP
nominal GDP