Economics - Measurement of Economic Growth
Measurement of Economic Growth
Economic growth is measured by the percentage change in Real GDP. Real GDP
adjusts the Nominal GDP figure for the impact of price changes (inflation
Example: If the Money GDP is $1155 billion and the GDP deflator is 110,
what is the Real GDP?
Real GDP is $1050 billion.
If Real GDP was $1000 billion the previous year, what is the rate of
While the rate of economic growth goes up and down in cycles, a trend rate
of economic growth can be calculated for an extended period of time.
While Real GDP is the preferred measure of economic growth, it does have
* Certain forms of productive activity, such as housework and home
repairs, are excluded.
* Some forms of productive activity, including farm produce consumed on
the farm, are not marketed (sold) and so cannot be measured accurately. The
ABS estimates their value.
* While the quantity of goods and services is measured, the quality is
* The distribution of the GDP is not shown.
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