Real vs nominal gnp, Managerial Economics

Real Vs Nominal GNP: "Deflating" by a price Index 

One of the problems that confront economists when measuring GNP is that they have to use money as the measuring rod.  These days however, inflation sends the general price level up and up clearly this means that the yardstick stretches in their hands everyday.

Economists repair most of the damage wrought by the elastic yardstick by using a price index.   The price index used to remove inflation (or "deflate'' the GNP) is called the GNP deflator.  The GNP deflator is defined as the ratio of nominal GNP to real GNP.  It is constructed as follows:

GNP Deflator       =     Nominal GNP

                                       Real GNP

Real GNP             =     Value at current Price

                                           CPI

Where CPI is Consumer Price Index

The GNP deflator is useful because it includes prices on all goods and services in GNP.

Posted Date: 11/28/2012 6:00:14 AM | Location : United States







Related Discussions:- Real vs nominal gnp, Assignment Help, Ask Question on Real vs nominal gnp, Get Answer, Expert's Help, Real vs nominal gnp Discussions

Write discussion on Real vs nominal gnp
Your posts are moderated
Related Questions
a)      The production-possibilities curve is? b)      If there is a shortage in the provider of a product, we can conclude that its price: c)      An enhance in supply and a

The relationship between, total expenditure and price elasticity of demand has summed up in the below table: Table: Elasticity and Consumption Expenditure Elas

State the Basis of business policies Managerial economics is the founding principle of business policies. Business policies are prepared based on studies and findings of manage

measurement and scaling techniques in business research

Describe the Managerial functions A manager has to take numerous decisions that conform to the objectives of the firm. Several business decisions fall prey to conditions of ris

Q. What is External Diseconomies? The expansion of an industry is likely to generate external diseconomies that raise the cost of production. An increase in the size of industr

SEARCH THEORIES  -  A BRIEF' HISTORICAL OVERVIEW   A search theory of unemployment is found even in the writings of A. C. Pigou in  the inter-war  period. To explain the  high

Prices of other goods must remain constant Changes in the prices of other goods frequently impinge on the demand for a particular commodity. If prices of commodities for which

Suppose that the price elasticity of demand for cereal is -0.75 and the cross-price elasticity of demand between cereal and the price of milk is -0.9. If the price of milk rises by

Q. Explain Price elasticity and total revenue? Given the relationship between price elasticity and marginal revenue of demand in Eq. II, the decision-makers can simply know whe