AP Macroeconomics AMSCO Guided Notes
2.6: Real vs. Nominal GDP
AP Macroeconomics Guided Notes
AMSCO 2.6 - Real vs. Nominal GDP
Essential Questions
- What is the difference between the real and nominal GDP, and how is it calculated using the GDP deflator?
I. Nominal GDP
1. What is nominal GDP and what does it measure about the economy?
2. Why can an increase in nominal GDP be misleading about actual economic production?
A. The Nominal GDP Formula
1. What are the components of the nominal GDP formula and what does each represent?
2. How would you calculate nominal GDP if consumer spending is $10 trillion, investment is $6 trillion, government spending is $7 trillion, exports are $1 trillion, and imports are $2 trillion?
II. Real GDP
1. What is real GDP and how does it differ from nominal GDP?
A. Calculating Real GDP
1. What is a base year and why is it important for calculating real GDP?
2. What is the GDP deflator and how does it indicate inflation or deflation?
3. How do you calculate real GDP using the nominal GDP and the GDP deflator?
III. GDP Per Capita
1. What is GDP per capita and how is it calculated?
2. Why can a country experience economic growth but still see a decline in per capita GDP?
3. What are the limitations of using GDP per capita as a measure of standard of living?
Key Terms
nominal GDP
real GDP
GDP deflator
real GDP per capita