Distinguish Between Real and Nominal Gdp

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Submitted By Bellaw345
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Question: Distinguish between real and nominal GDP. Why is the distinction important?

Answer: nominal GDP uses current quantities from the current year, whereas real GDP uses current quantities but values from the base year. We use nominal GDP when we want to estimate of the total value of a country’s production. We use real GDP when we what to determine the growth in GDP.

Define the following economic terms?
a. National Income accounting * A system used by the government to determine economic activity.
b. Expenditure, output and income approaches * The expenditures approach says GDP= consumption + investment + government expenditure + exports - imports. The income approach sums the factor incomes to the factors of production. The output approach is also called the "net product" or "value added" approach.
c. Final and intermediate goods * An intermediate good is a good or service that is used in the eventual production of a final good, or finished product. These goods are sold by industries to one another for the purpose of resale or producing other goods.
d. Gross and net private domestic investment * Gross private domestic investment is the measure of physical investment used in computing GDP in the measurement of nations' economic activity. This is an important component of GDP because it provides an indicator of the future productive capacity of the economy. * Net private domestic investment indicates the total amount of investment in capital by the business sector that is actually used to expand the capital stock.
e. Net exports * Net exports are the difference between a country's total value of exports and total value of imports. Depending on whether a country imports more goods or exports more goods, net exports can be a positive or negative value.
f. GNP, NDP, NNP, NI * Gross national Product – the market value…...

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