# Why was nominal GDP greater than real GDP in each of those quarters?

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# Gross Domestic Product

INSTRUCTIONS:

Visit the Bureau of Economic Analysis Web site at www.bea.gov  In U.S. Economic Accounts under National click on Gross Domestic Product (GDP), then Interactive Tables: GDP and the National Income and Product Account (NIPA) Historical Tables, click “Begin using the data”, and use Section 1 - Tables 1.1.5 and 1.1.6 to identify the GDP (nominal GDP) and real GDP for the past four quarters.

a) Present the information that you received in your project as a table.

b) Write a report (1 page double - spaced), which contains the analysis of the results you received.

In this report consider, but do not be limited to the following:

1. Why was nominal GDP greater than real GDP in each of those quarters?
2. What was the percentage change in Nominal GDP for the most recent quarter compared to the previous quarter?  What was the percentage change in Real GDP for the two quarters?
3. What accounts for the difference in the two percentages?

Part 2: Income Approach to Calculating GDP (weight 25% of the assignment grade)

Complete the following exercise:

Go to http://www.bea.gov/

Find the information on GDP in billions of current dollars for the past four quarters. In U.S. Economic Accountsunder National click on Gross Domestic Product (GDP), then click on Interactive Tables: GDP and the National Income and Product Account (NIPA) Historical Tables – click “Begin using the data”- choose Section 1: Domestic Product and Income and find table 1.7.5

Create the table that contains the following information for the last year quarterly. Omit the intermediate lines found in Table 1.7.5 on the web site.

Gross domestic product

Gross national product

Net national product

National income

Personal income

Write a report in your own words (1 page, double-spaced), which contains the analysis of the results you received. In this report consider, but do not be limited to the following:

1. What is the difference between gross domestic product (GDP) and gross national product (GNP)? What is the difference in what GDP measures compared to GNP?

2. Based on the table, what calculations must you make to determine GNP from GDP?

3. What is national income (NI)? What does NI measure?

CONTENT:

Name: Instructor: Institution: 30th August 2015 Part 1 (a).Table. GDP 2014, 3rd Quarter 2015, 4th Quarter 2015, 1st Quarter 2015, 2nd Quarter 1 Real Gross Domestic Product 16,068.8 16,151.4 16,177.3 16,324.3 2 Nominal Gross Domestic Product 17,522.1 17,615.9 17,649.3 17,902.0 (b). Report. Based on the statistical representation of the data from the table above, it is very clear that the nominal GDP is greater than the real GDP in each of the respective quarters. The underlying reason for this is that the nominal GDP does not keep into consideration or allow for inflation. This is where the real GDP comes in, since it is well adjusted to keep in mind the current economic situation, specifically, the inflation rate. In calculation of the percentage changes in the GDP between the 2nd and 1st quarter of the year 2015, it can be seen that there is a 0.91% growth in the real GDP, and a 1.43% growth of the nominal GDP respectively. The differences in the percentages between the two quarters are an indication of the varying

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