GDP = Y
Four pieces of GDP
1. Consumption(C): private spending on goods and services not intended for use in future
production. (2/3)
2. Investment(I): private spending (by firms) on tools, plant, and equipment used to produce
future output. Count for inventory
3. Government Spending(G): spending by all levels of government on final goods and
services
4. Net Exports(NX): exports – imports
Y = C+I+G+NX
Y = C+I+G+(Exp-Imp)
Growth rate of X = % change of x = change in X/starting X = (X1-X0)/X0
Nominal GDP: Raw GDP data, unadjusted for price changes
GDP in “current dollars”
Real GDP: GDP adjusted for price changes across time
GDP in “constant dollars”
Dollars from a chosen “base period”
Real GDP
Begin with raw nominal GDP data
1. Divide to filter out old prices
2. Multiply to put in new
Nom GDPt/Pt ×Pbase year = Real GDPt