00:01
What are the 10 principles of economics? first of all, people face trade -offs when they make a choice.
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Two, the cost of something is what you give up.
00:41
Three, rational people think on the margin.
00:44
That means you either do a little bit more or a little less.
01:01
Four, people respond to incentives.
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This could be things like cash rewards, raises, etc.
01:13
Five, trade can make everyone better off.
01:28
6.
01:29
Markets organize economic activity.
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7.
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Governments can improve market outcomes.
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8.
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A country's standard of living depends on its ability to produce.
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9.
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Prices rise when the government prints too much money.
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10.
02:58
Society faces a tradeoff between inflation and unemployment.
03:20
So basically if one goes up, the other one goes down.
03:26
We need to find nominal gdp, real gdp, and gdp deflator for each of the years, using 2001 as the base year.
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First of all, let's do nominal gdp.
03:45
So we only look at consumption in this case, although usually we would include other factors like exports.
03:52
However, we only have consumption to go with.
03:54
So in 2001, we're going to calculate the amount spent on milk.
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We have $10 per liter.
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There are 100 liters of milk.
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Total consumption was 1 ,000.
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So for honey, the price is $2 per pound.
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We could suit 50 pounds, so that would be 100.
04:40
So the nominal gdp is 1 ,100 for that year.
04:54
Now for the next year, we're going to do the same thing.
05:08
Now we have 200 liters instead.
05:12
That would be $2 ,000 spent on milk.
05:21
So for honey, we have $2 ,000.
05:23
Per pound and then we have 100 pounds that will give us $200 so the total nominal gdp is $2 ,200 so the gdp deflator is going to be one because you can see the prices did not change so gdp deflator is going to be one and then to calculate real gdp real gdp is equal to nominal gdp divided by the deflator.
06:04
So therefore, real gdp is equal to the nominal gdp.
06:22
Then for the next year, we will calculate nominal gdp.
06:36
The price of milk has gone up to $20.
06:42
And there are 200 liters.
06:47
So we have $4 ,000.
06:52
Then for honey, we have $4 per pound.
06:57
And we have 100 pounds, gives you $400.
07:07
So the total nominal gdp for this year is 4 ,400.
07:12
So the deflator is going to be 1 .5 .0, because prices have doubled, so they have increased by 50%.
07:28
And then we're just going to add the percentage as a decimal to 1 to get our, gdp deflator...