GDP that is measured at

current prices is called GDP that has been adjusted for any

price changes over time is called

Let’s see how it works through one more example

NOMINAL GDP.

REAL GDP.

Nominal GDP Vs. Real GDP

1. Calculate the Nominal GDP for both years.2. Calculate the Real GDP using prices from 2010.3. By what percent did Nominal and Real GDP grow?

YEAR iPhones Apples

Qty. Price Qty. Price2010 100 ¥4,000 500

kgs.¥ 25 /

kg

2011 120 ¥ 5,000 600 kgs.

¥ 30 / kg

NOMINAL GDP

= (100 x 4,000) + (500 x 25)

= ¥ 412,500= (120 x 5,000) +

(600 x 30) = ¥ 618,000

REAL GDP(using 2010 Prices)

= (100 x 4,000) + (500 x 25)

= ¥ 412,500= (120 x 4,000) +

(600 x 25) = ¥ 495,000

Growth ¥ 205,500 ¥ 82,500

Growth Rate

= 205,500 x 100 412,500 = 49.8%

= 82,500 x 100 412,500 = 20 %

Comparing Real GDPReal GDP growth Annual growth %

2003 2004 2005 2006 2007 2008 2009 2010

Australia 4.2 3.0 3.1 3.6 3.8 1.4 2.3 2.6

UK 2.8 3.0 2.2 2.8 2.7 -0.1 -4.9 1.4

Korea 2.8 4.6 4.0 5.2 5.1 2.3 0.3 6.2

Japan -0.2 1.2 0.8 3.4 2.7 1.0 -4.7 3.6

USA 2.5 3.6 3.1 2.7 1.9 0.0 -2.7 2.9

Germany 0.2 1.2 0.8 3.4 2.7 1.0 -4.7 3.6

What countries are represented

in this?

8 millio

n

For every 1 person in

Switzerland, there are 100

people in China

Wait a minute…..China’s

GDP should be more than Switzerland

because it has more people that

Switzerland…..CHECK THIS OUT?

1.3 billion

So how much

output is each

person in

China

producing on

average?

Real GDP per capita

of a country is the

GDP of a country

divided by the total

population of the country.

REAL GDP PER CAPITA = REAL GDP

POPULATION

1.3 billio

n

OUTPUT PER PERSON!!!!

8 millio

n

1.3 billio

n

8 millio

n