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AP Economics

AP Economics. Mr. Bernstein Module 11: Interpreting Real Gross Domestic Product January 2019. AP Economics Mr. Bernstein. Interpreting Real Gross Domestic Product Objectives Learn the difference between real GDP and nominal GDP

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AP Economics

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  1. AP Economics Mr. Bernstein Module 11: Interpreting Real Gross Domestic Product January 2019

  2. AP EconomicsMr. Bernstein Interpreting Real Gross Domestic Product • Objectives • Learn the difference between real GDP and nominal GDP • Understand why real GDP is the appropriate measure of real economic activity

  3. AP EconomicsMr. Bernstein What Does GDP Tell Us? • The value of current production at current price levels • Is a gauge of the total size of an economy • Is used to compare economies • GDP can be misleading – ie 1996 dollars are worth less than today’s dollars

  4. AP EconomicsMr. Bernstein Real GDP: A Measure of Aggregate Output • Inflation’s effect on GDP • GDP = P * Q. So if P rises, so does GDP, even if Q does not • So we measure Real GDP • Use a baseline point in time, ie “in 1996 dollars” • Aka Constant Dollar GDP

  5. AP EconomicsMr. Bernstein Real GDP: A Measure of Aggregate Output

  6. AP EconomicsMr. Bernstein What Real GDP Doesn’t Measure • Positive statistics…not normative • Does not include • Underground economy • DIY • Sale of used goods • Volunteerism • Value of Leisure • Does not measure a nation’s self-esteem or sense of happiness

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