Nominal GDP vs. Real GDP

Nominal GDP - Value of output produced in current prices

- Can increase from year to year if either output or price increase 
NGDP = Price x Quantity

Real GDP - Value of output produced in base year or constant prices

-Can increase from year to year only if output increases  

RGDP = Base Price x Quantity   

Price index - A measure of inflation by tracking changes in the price of a market basket of goods compared to the base year.

 Formula: price of market basket of goods in current year / price of market basket of goods in base year  x 100

GDP Deflator - Is a price index that is used to adjust from nominal to real GDP 

• In the base year the GDP deflator = 100  
• For years before the base year it is less than 100
• For years after the base year it is greater than 100

Formula - (Nominal GDP/ Real GDP)  ×100 

Inflation formula - (New GDP deflator - Old GDP deflator / Old GDP deflator ) ×100 

Budget Formula: Government purchases of good + services + government transfer payments - government tax and fee collection 

• Positive number = deficit  

• Negative number =surplus 

Trade Formula: Exports- Imports 

• Positive number = surplus 
• Negative number = deficit

GNP Formula: GDP(expenditure) + net foreign factor payment 

Net national product (NNP) formula: GNP- depreciation 


Net domestic product (NDP) formula: GDP - depreciation 

National income formula: 

1. GDP- Inderect business taxes - depreciation - net foreign factor payment  
2. Compensation of employees + properitares income + rental income + interest income  + corporate profits  

Disposable personal income formula: national income - personal household taxes + government transfer payments