You will need

- -GDP study of the year nominee
- -GDP real words (i.e., base year)

Instruction

1

Define nominal GDP in the studied year.GDP (gross domestic product - GDP) is the total value of all goods and services produced in one specific country for a certain period of time. Mainly for calculating GDP annual period. Nominal gross domestic product referred to as GDP measured in current period prices. In order to know its value, you can use the website of the state statistical service (http://www.gks.ru/)

2

Define real GDP.Real GDP is gross domestic product, which eliminated the changes in the price level. It is presented in constant prices, i.e. in prices of that base year, against which we need to calculate the deflator. In terms of tasks macroenomic real GDP, as a rule, is given. In practice, on the website of Rosstat presented the GDP deflator, expressed in percent. About it it is possible to calculate real GDP. Thus, this indicator helps us to see the real changes in production volumes of goods and services in the studied country and helps to identify trends.

3

Substitute the known values into the formula:

**Deflator**GDP = nominal GDP/Real Supprimer calculating the GDP deflator: if in 2010 the nominal GDP amounted to 120 000 CONV. den. units, and real GDP in the base year (2008) 100 000 CONV. den. units, the deflator is 120 000/100 000 = 1,2. This result means that the price level for this period increased by 1.2 times.4

**Deflator**GDP refers to the Paasche index. It indexes to the changing set of goods or with variable weights. It can also be calculated by the given formula. In fact, this formula is similar to the previous one, but in terms of tasks sometimes give data for GDP and the volume and price of produced/consumed goods. Substituting the known to us the numbers into the formula, we get the Paasche index or the GDP deflator.

Note

The GDP deflator reflects changes in price and consumption structure, because it uses the volume of goods and services this year.

However, the disadvantages of its calculation include the complexity of obtaining quantitative characteristics of the studied products. It may understate inflation because of the changed structure of demand for the risen in price goods.

However, the disadvantages of its calculation include the complexity of obtaining quantitative characteristics of the studied products. It may understate inflation because of the changed structure of demand for the risen in price goods.

# Advice 2 : How to calculate GDP deflator

GDP (Gross domestic product) is the basic macroeconomic indicators determining economic performance. The GDP deflator is a price index reflecting the price changes of the consumer basket for a certain time period.

Instruction

1

The GDP deflator is one of the common indicators of calculation of the consumer price index which reflects inflation level in the country. The GDP deflator is based on the size of the consumer basket of the current period, but not the base. Thus, the GDP deflator it is also assumed and the Paasche index.

2

The GDP deflator includes the final products of consumption goods and services accounted for in GDP. Getting to the calculation of GDP, throw away all indicators of the goods purchased in previous years, and goods, which is an intermediate in the manufacture of the final product. For example, food prepared at home and dinner cooked in the restaurant. Both dishes can be exactly the same, but the end product, the value of which determines the level of GDP, will be the dinner.

3

The calculation of GDP is based on the following principle: "Everything that happens in the country, will necessarily be sold." Thus, the simple calculation of GDP is by adding up all the amounts that consumers spend on the purchase of manufactured end products. In other words, GDP can be represented as a sum of all costs required for foreclosure on the market for all manufactured goods.

4

The GDP deflator is the ratio of nominal and real GDP, expressed in percent. The calculation formula is as follows:

GDP deflator = nominal GDP / Real GDP * 100%.

GDP deflator = nominal GDP / Real GDP * 100%.

5

Nominal GDP is expressed in current prices of the period, and real GDP in the base year, which are unchanged. The base year can be selected as the previous current period year, or any other. Comparing the later year with the current (early) is used to match historical events with the real situation. Relying, for example, real GDP, 1970 to 1990 prices, 1990 will be the base, while the 1970 – current.

Note

It should be noted that when calculating the GDP deflator in the base year, nominal and real GDP are equal, and the deflator is equal to 1.

Useful advice

The GDP deflator reflects the current change in the price of goods and services, so it is better to use, if necessary, to consider this situation than the consumer price index.

# Advice 3 : What is GDP per capita

Modern man in his daily life is confronted with an abundance of economic information. Often it is very difficult to understand without special knowledge. For example, the problem may be ignorance of different terms and concepts commonly encountered such as "GDP per capita".

First, you must understand what is GDP. This abbreviation stands for gross domestic product. This is one of the main indicators of economic development. This ratio consists of the market prices of all goods and services produced for final consumers on the territory of any country. GDP is usually calculated on a time period of year. The growth of this indicator, adjusted for inflation often means the economy growth, increase of volume of production and services. Therefore, most of the world, including Russia, seeking to increase its value.

Besides the GDP, there is associated another important economic indicator - the gross domestic product per capita. It is calculated by dividing the total cost of all items by the number of people living in the country. This figure is needed primarily in order to adequately compare the economic development of various countries based on population. GDP per capita is usually calculated in us dollars based on purchasing power parity of the local currency, i.e. is taken into account not just the market exchange rate and the quantity of goods that can be purchased at her.

GDP per capita could reflect another important indicator is labour productivity. But to do this, economists usually change the method of calculation and divide the cost of all goods not on the total number of the population, but only on the number of working citizens.

However, there are economists who criticize the calculation of GDP per capita from the point of view of the reality of this economic indicator. In particular, the controversy raises the question of whether it is legitimate to take into account the factor of development of economy the value of goods and services produced in the country firms, the head offices of which are located abroad. There is therefore a parallel indicator of economic development - GNP (gross national product). This index takes into account only goods and services produced by the organizations belonging to the national capital.

# Advice 4 : How to find real GDP

**GDP**, or gross domestic product, is one of the most important indicators of economic development. The calculations distinguish between nominal and real

**GDP**. The second one is more intuitive, because it takes into account changes in the price level. Thus, to calculate real

**GDP**, you need to "clear" nominal from the effects of inflation.

You will need

- - statistics for the desired period;
- calculator or computer application for calculations.

Instruction

1

Define the base year, i.e. the year, the prices of which you will calculate the real

**GDP**. For example, you need to calculate the real**GDP**of 2010 at 2009 prices, in this case, the base year is 2009. Keep in mind that the base year does not have to be chronologically before the current (study).2

Find out the volume of nominal

**GDP**of the studied period, expressed in monetary units. This information you can get in statistical reference books or on the websites of statistical services. For example, you can use the data of Rosstat and the world Bank.3

Determine index prices, which will be used to calculate real

**GDP**, and find its value. The most common are the consumer price index or the deflator**of GDP**. CPI, or consumer price index is calculated based on the cost of the consumer basket, which includes goods and services consumed by an urban family of moderate means in the course of the year.4

In macroeconomic models and objectives to calculate real

**GDP**is typically used so-called deflator**of GDP**. It is calculated on the basis of the value of all goods and services produced by a national economy during the year. Indicators such as the CPI and the deflator**of GDP**, as a rule, set the conditions of the problem or you can find them in official statistical handbooks.5

Most often the statistical service to publish the values of these indices in comparison to the prices of the previous year, so if your task as a base is not used prior to the study year, find the value of the index can be difficult. In addition, it is virtually impossible to calculate yourself, as it is necessary to have information about the amount consumed (or produced) product in each category, as well as the prices for these commodities.

6

Divide the nominal

**GDP**by the value of the selected price index. The resulting number is the amount of real gross domestic product.