The accompanying table shows data on nominal GDP (in...

The accompanying table shows data on nominal GDP (in billions of dollars), real GDP (in billions of 2005 dollars), and population (in thousands) of the United States in $1960,1970,1980,1990,2000,$ and $2010 .$ The U.S. price level rose consistently over the period $1960-2010$. a. Why is real GDP greater than nominal GDP for all years until 2000 and lower for $2010 ?$ b. Calculate the percent change in real GDP from 1960 to 1970,1970 to 1980,1980 to 1990,1990 to 2000 , and 2000 to $2010 .$ Which period had the highest growth rate? c. Calculate real GDP per capita for each of the years in the table. d. Calculate the percent change in real GDP per eapita from 1960 to 1970,1970 to 1980,1980 to 1990,1990 to 2000 , and 2000 to $2010 .$ Which period had the highest growth rate? -. How do the percent change in real GDP and the percent change in real GDP per capita compare? Which is larger? Do we expect them to have this relationship?

The accompanying table shows data on nominal GDP (in billions of dollars), real GDP (in billions of 2005 dollars), and population (in thousands) of the United States in $1960,1970,1980,1990,2000,$ and $2010 .$ The U.S. price level rose consistently over the period $1960-2010$.
a. Why is real GDP greater than nominal GDP for all years until 2000 and lower for $2010 ?$
b. Calculate the percent change in real GDP from 1960 to 1970,1970 to 1980,1980 to 1990,1990 to 2000 , and 2000 to $2010 .$ Which period had the highest growth rate?
c. Calculate real GDP per capita for each of the years in the table.
d. Calculate the percent change in real GDP per eapita from 1960 to 1970,1970 to 1980,1980 to 1990,1990 to 2000 , and 2000 to $2010 .$ Which period had the highest growth rate?
-. How do the percent change in real GDP and the percent change in real GDP per capita compare? Which is larger? Do we expect them to have this relationship?

Key Concepts

Nominal GDP

Nominal GDP represents the total market value of all goods and services produced in an economy measured at current prices during the time period in which they are produced. It is affected by changes in the price level and does not account for inflation, making it less useful for comparing economic activity over time without proper adjustments.

Real GDP

Real GDP adjusts the nominal GDP for changes in the price level, using constant prices from a selected base year to eliminate the effects of inflation. This adjustment makes real GDP a more accurate measure of an economy's true growth and productive capacity over time.

Price Level and Inflation

The price level refers to the average of current prices across the economy's goods and services, and inflation is the sustained increase in these price levels over time. Inflation affects nominal values and necessitates adjustments, like converting nominal GDP to real GDP, to accurately compare economic output across different time periods.

GDP Growth Rate Calculation

The GDP Growth Rate is the percentage change in GDP over a certain period, often calculated using real GDP to remove the influence of inflation. This rate indicates how quickly the economy is growing or contracting, and it forms a fundamental indicator for economic performance analysis.

Real GDP Per Capita

Real GDP per capita is calculated by dividing real GDP by the population, providing an average economic output per person. This measure is crucial for assessing the standard of living and overall economic well-being, as it accounts for both the total economic output and the size of the population.

Transcript

00:01 The company table shows data on nominal gdp and billions of dollars, real gdp and billions of 2005, and population in thousands of the u .s.

00:10 In 1960, 1970, 1980, 1990, 2010.

00:16 The u .s.

00:17 Price level rose consistently over the period 1960 to 2010.

00:22 So here we have the years.

00:24 Here's the nominal gdp in billions of dollars, real gdp and billions of $2 ,05, and the population in thousands.

00:30 Why is real gdp greater than nominal gdp for all years until 2000 and lower for 2010? real gdp is calculated by multiplying output for these years before 2000, multiplied by the prices of each year, each of the previous years.

00:47 Between 1916, 2000 prices rose, and hence the real gdp was greater than nominal gdp for all years until 2000.

00:55 But for the years after 2000, prices were lower for each of the previous years, and hence real gdp was lower in the years 2000.

01:02 In 2010.

01:04 Calculate the percent change in real gdp from 1960 to 1970, 1970 to 1980, 1980 to 1990, 1990 to 1990 to 1990, 1990 to 2000, and 2000 to 2010, which period had the highest growth rate.

01:19 The percentage change in real gdp from 1960 to 1970 is 50 .8 percent.

01:26 The percentage change in real gdp from 1970 to 1980 is 36 .4 percent.

01:31 The percentage change in real gdp from gdp from 1980 to 1990 is 37 .6%.

01:38 The percentage change from real gdp from 1990 to 2000 is 39 .7%.

01:45 And the percentage change in real gdp from 2000 to 2010 is 16 .7%.

01:51 Calculate real gdp per capital for each of the years in the table.

01:56 Real gdp per capita equals real gdp divided by the population.

02:02 In 1960, it was 15 ,000...