00:01
So here we've got a question about the gdp deflator, which we usually define in words as sort of roughly speaking a comprehensive measurement of price level.
00:14
The idea is that the cpi, which we use all the time, only measures consumer facing prices.
00:26
It measures things that consumers use every day, but there's lots of goods and services in the economy that are not used every day, right? so the gdp flater definition involves the entirety of gdp, not just the consumer facing part of gdp.
00:50
So we define nominal gdp as nominal, the gdp deflator is nominal gdp over real gdp, right? and to see why this makes sense, let's spill those out, right? so this is equal to, right, the sum of prices times outputs.
01:09
Nominal gdp is the amount of stuff produced times the market price of it.
01:14
Real gdp, however, is the sum of this not using the current prices, but using some base year prices, right? we are looking at base year prices, not current prices when we measure real gdp, right? we're holding prices constant over time.
01:31
So if we want this to be less than 100%, right, if normally we think of multiplying this by 100%, because we like percents more than, you know, decimals.
01:45
So we want this to be getting lower, right? how do we make this number go down, right? so imagine that no changes in prices.
02:00
If prices are the same over time, right? these prices have not changed...