Real vs Nominal GDP + GDP Deflator

What type of GDP uses current prices?

Nominal GDP

What type of GDP uses constant base-year prices?

Real GDP

Why does total spending increase over time? (2 reasons)

More output / Higher prices

Formula: GDP Deflator = (___ GDP / ___ GDP) × 100

Nominal / Real

Real GDP isolates changes in ___

Quantity/output

If nominal GDP = real GDP, then the GDP deflator is...?

100

What does the GDP deflator measure?

Price level change

What problem does chain linking solve?

Changes in products over time

True/False: GDP Deflator includes only consumer goods.

False

What year is used as a benchmark when calculating Real GDP?

Base year

What does a GDP deflator of 200 mean compared to the base year?

Prices doubled

Which is better for measuring standard of living: nominal or real GDP?

Real GDP