GDP DEFLATOR AND GROWTH RATE
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NOMINAL GDP IGDP is gross domestic product (GDP) evalu at current market prices, GDP being the monetary value of all the finished goods and services produced within a country's borders in a specific time period Nominal differs from real GDP in that it includes changes in prices due to inflation or a rise in the overall price level.
REAL GDP It is a macroeconomic measure of the value of economic output adjusted for price change. This adjustment transforms the money-value measure, nominal GDP, into an index for quantity of total output.
SIGNIFICANCE Due to inflation, GDP increases and does not actually reflect the true growth in an economy. That is why the GDP must be divided by the inflation rate (raised to the power of units of time in which the rate is measured) to get the growth of the real GDP. Different organizations use different types of Real GDP measures, for example the United Nations UNCTAD uses 2005 Constant prices and exchange rates while the FRED uses 2009 constant prices and exchange rates, and recently the World Bank switched from 2005 to 2010 constant prices and exchange rates.
GDP DEFLATOR Nominal GDP GDP deflator = Real GDP
Nominal GDP Real GDP = GDP deflator
GDP DEFLATOR In economics, the GDP deflator (implicit price deflator) is a measure of the level of prices of all new, domestically produced, final goods and services in an economy.
GROWTH RATE Economic growth is the increase in the inflation-adjusted market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP. It is used to measure an economy's recession or expansion If the income within a country declines for two consecutive quarters, it is considered to be in a recession. Conversely, if the country has a growth in income for two consecutive quarters, it is considered to be expanding