To measure the production of the economy we need to combine an array of goods and services. We combine from new cars to basketball games. The goal is to summarize the total production of the entire economy into a single number this number is called the gross domestic product or (GDP). There are two different types of GDP the two types are real GDP and nominal GDP. In this example we are going to use CDs and Tennis Racquets for 2004 and 2005.
Real GDP: A measure of GDP that takes into account changes in prices.
Nominal GDP: Is when you use current prices measure GDP
Simply put GDP is what is used to measure growth in the economy. If GDP climbs at a steady rate it is called economic growth. In this paper we are going to focus on real GDP. To calculate real GDP you must begin by using constant or a base price. Nominal GDP&nbs ...