{"id":37332,"date":"2017-02-19T03:00:40","date_gmt":"2017-02-19T08:00:40","guid":{"rendered":"http:\/\/quotulatiousness.ca\/blog\/?p=37332"},"modified":"2017-07-14T10:07:05","modified_gmt":"2017-07-14T14:07:05","slug":"nominal-vs-real-gdp","status":"publish","type":"post","link":"https:\/\/quotulatiousness.ca\/blog\/2017\/02\/19\/nominal-vs-real-gdp\/","title":{"rendered":"Nominal vs. Real GDP"},"content":{"rendered":"<p align=\"center\"><iframe loading=\"lazy\" width=\"853\" height=\"480\" src=\"https:\/\/www.youtube.com\/embed\/rGqhTQyY6g4?list=PL-uRhZ_p-BM52EbMG1NR1ZfG9tEvcxE4u\" frameborder=\"0\" allowfullscreen><\/iframe><\/p>\n<blockquote><p><strong>Published on 19 Nov 2015<\/strong><\/p>\n<p>&#8220;Are you better off today than you were 4 years ago? What about 40 years ago?&#8221;<\/p>\n<p>These sorts of questions invite a different kind of query: what exactly do we mean, when we say \u201cbetter off?\u201d And more importantly, how do we know if we\u2019re better off or not?<\/p>\n<p>To those questions, there\u2019s one figure that can shed at least a partial light: real GDP.<\/p>\n<p>In the previous video, you learned about how to compute GDP. But what you learned to compute was a very particular kind: the nominal GDP, which isn\u2019t adjusted for inflation, and doesn\u2019t account for increases in the population.<\/p>\n<p>A lack of these controls produces a kind of mirage.<\/p>\n<p>For example, compare the US nominal GDP in 1950. It was roughly $320 billion. Pretty good, right? Now compare that with 2015\u2019s nominal GDP: over $17 trillion.<\/p>\n<p>That\u2019s 55 times bigger than in 1950!<\/p>\n<p>But wait. Prices have also increased since 1950. A loaf of bread, which used to cost a dime, now costs a couple dollars. Think back to how GDP is computed. Do you see how price increases impact GDP?<\/p>\n<p>When prices go up, nominal GDP might go up, even if there hasn\u2019t been any real growth in the production of goods and services. Not to mention, the US population has also increased since 1950.<\/p>\n<p>As we said before: without proper controls in place, even if you know how to compute for nominal GDP, all you get is a mirage.<\/p>\n<p>So, how do you calculate real GDP? That\u2019s what you\u2019ll learn today.<\/p>\n<p>In this video, we\u2019ll walk you through the factors that go into the computation of real GDP.<\/p>\n<p>We\u2019ll show you how to distinguish between nominal GDP, which can balloon via rising prices, and real GDP\u2014a figure built on the production of either more goods and services, or more valuable kinds of them. This way, you\u2019ll learn to distinguish between inflation-driven GDP, and improvement-driven GDP.<\/p>\n<p>Oh, and we\u2019ll also show you a handy little tool named FRED \u2014 the Federal Reserve Economic Data website.<\/p>\n<p>FRED will help you study how real GDP has changed over the years. It\u2019ll show you what it looks like during healthy times, and during recessions. FRED will help you answer the question, \u201cIf prices hadn\u2019t changed, how much would GDP truly have increased?\u201d<\/p>\n<p>FRED will also show you how to account for population, by helping you compute a key figure: real GDP per capita. Once you learn all this, not only will you see past the the nominal GDP-mirage, but you\u2019ll also get an idea of how to answer our central question:<\/p>\n<p>&#8220;Are we better off than we were all those years ago?&#8221;<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"<p>Published on 19 Nov 2015 &#8220;Are you better off today than you were 4 years ago? What about 40 years ago?&#8221; These sorts of questions invite a different kind of query: what exactly do we mean, when we say \u201cbetter off?\u201d And more importantly, how do we know if we\u2019re better off or not? To [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":35193,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[25],"tags":[1094,165,1093,1143,290],"class_list":["post-37332","post","type-post","status-publish","format-standard","hentry","category-economics","tag-gdp","tag-inflation","tag-macroeconomics","tag-principlesofeconomics","tag-statistics"],"jetpack_featured_media_url":"https:\/\/quotulatiousness.ca\/blog\/wp-content\/uploads\/2016\/06\/favicon.png","jetpack_shortlink":"https:\/\/wp.me\/p2hpV6-9I8","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/37332","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/comments?post=37332"}],"version-history":[{"count":1,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/37332\/revisions"}],"predecessor-version":[{"id":37333,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/37332\/revisions\/37333"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/media\/35193"}],"wp:attachment":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/media?parent=37332"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/categories?post=37332"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/tags?post=37332"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}