GDP Deflator

Welcome to another episode of my podcast.

If GDP rise from one year to another, it may be either: 1) the economy is producing more goods and services or 2) goods and services are selling at higher prices. Economist really want to measure the total volume of output of goods and services produced, and not the prices at which these goods and services sell. Economist correct GDP for the effects of inflation,that is, for rising prices. They use the measure of Real GDP and Nominal GDP. The percentage increase in the GDP Deflator from one period to next defines the Rate of Inflation.

Podcast 6: Inflation

Inflation is an increase in the general level of prices in the economy; a decline in the level of prices is deflation. The primary measure of inflation is the Consumer Price Index. It compares the prices of a ” market basket” of consumer goods in a particular year to the prices for that market basket in a base period, to produce a price index. The rate of inflation from one year to the next is equal to the percentage change in the CPI between the current year and the preceding year.

Podcast 3: Circular Flow Model Of Economic Activity

When we calculate GDP in the economy, we are measuring the value of total production/ total expenditures, on the economy’s output of goods and services. Furthermore, we are also measuring the total income of everyone in the economy. What is the reason? Because every dollar of spending by some buyer ends up being a dollar of income for some seller. In short, for an economy as a whole, expenditures must equal income. The circular flows shows the flow of money in the economy.

Podcast 4: Gross Domestic Product (GDP)

The most widely reported statistic throughout the world of measuring economic performance is Gross Domestic Product. Gross Domestic Product or GDP is the market value of all final goods and services produced within a nation’s geographic borders during a period of time, usually a quarter or a year.