Lecture #3.

ECONOMIC GROWTH RATES

What is the difference between nominal and real GDP?
Real GDP tracks the total value of goods and services calculating the quantities but using
constant prices that are adjusted for inflation. This is opposed to nominal GDP that does not
account for inflation (https://www.investopedia.com, December 28, 2021).

Nominal GDP (NGDP) = Nominal GNP – NFIA

Real GDP (RGDP) = Nominal GDP / CPI (base year)
CPI – Consumer price index
Real GDP Growth Rate (RGDPGR) = RGDP2 – RGDP 1 x 100 = %
RGDP1

Example:
Year NGDP (in CPI (b=2005) RGDP (b=2005) RGDPGR
(Given year) billion pesos) (b=2005)

2005 500 100% 500 ------

2006 600 110 545.45 9.09%
2007 800 115 695.65 27.54%
2008 850 125 680 -2.25%
2009 1,000 127.5 784.31 15.34%
SRGDPGR 49.72%
Average 12.43%
RGDPGR

RGDP 2005 (b=2005) = 500/100% = 500

RGDP 2006 (b=2005) = 600/110% = 545.45
RGDP 2007 (b=2005) = 800/115% = 695.65
RGDP 2008 (b=2005) = 850/125% = 680
RGDP 2009 (b=2005) = 1,000/127.5% = 784.31
RGDPGR2006 = 545.45 – 500 x 100 = 9.09%
500
RGDPGR2007 = 695.65 – 545.45 x 100 = 27.54%
545.45
RGDPGR2008 = 680 – 695.65 x 100 = - 2.25%
695.65 695.65
RGDPGR2009 = 784.31 – 680 x 100 = 15.34%
680

Year NGDP (in CPI (b=2006) RGDP (b=2006) RGDPGR

(Given year) billion pesos) (b=2006)
2005 500 90.91% 549.99 ------
2006 600 100% 600 9.09%
2007 800 104.55 765.18 27.54%
2008 850 113.64 747.98 -2.25%
2009 1,000 115.91 862.74 15.34%
SRGDPGR 49.72%
Average 12.43%
RGDPGR

New CPI with New base year = [old CPI / new base yr CPI] x 100
CPI2005 (b=2006) = [100% / 110%] x 100 = 90.91%
CPI2006 (b=2006) = [110% / 110%] x 100 = 100%
CPI2007 (b=2006) = [115% / 110%] x 100 = 104.55%
CPI2008 (b=2006) = [125% / 110%] x 100 = 113.64%
CPI2009 (b=2006) = [127.5% / 110%] x 100 = 115.91%
Per Capita NGDP (PCNGNP) and Per Capita RGDP (PCRGDP),

Per capita is a Latin term that translates to "by head." Per capita means the average per
person and is often used in place of "per person" in statistical observances. The phrase can be
used for almost any kind of population description but is common when discussing economic
data (
https://www.investopedia.com. December 15, 2022).

PCRGDP = RGDP / population

Year NGDP (in RGDP Population PCNGDP PCRGDP

(Given year) billion pesos) (b=2005) (b=2005)
2005 500 500 100 5 5
2006 600 545.45 110 5.45 4.96
2007 800 695.65 120 6.67 5.80
2008 850 680 125 6.80 5.44
2009 1,000 784.31 130 7.69 6.03