Equation pt.1

Nominal GDP:
 -Value of output in current prices, can increase from year to year if either out put of prices increase -(Price X Quantity)

Real GDP:
 -Value of output produced at constant or base year prices
 -Adjusted for inflation
-Can increase from year to year only if output increases
-(Price X Quantity)

GDP Deflator:
-A price index used to adjust from nominal to real
-(Nominal GDP/Real GDP) X 100
-In base year GDP deflator will always equal 100

Consumer Price Index:
-Most commonly used to measure inflation
-(Cost of market goods in a give year/ Cost in the base year) X 100

Inflation:
-(Price Index in year 2) - (Price index in year 1) X 100
-Creditors, lenders, saver, and those on a fixed income are all hurt by inflation
-Debtors aren't hurt by inflation

Nominal Interest Rates:
-The percent increase in money the borrower must pay back the lender
-Fisher effect
-(Expected interest + Inflation premium)
-Percent increase in purchasing power the borrower must pay the lender in loans
-Adjusted for inflation