Part 1: Expenditures Approach To Calculating Gdp

DATA EXERCISE #1 NameEconomicsTutor’s Name15/02/2015Part 1: Expenditures Approach to Calculating GDP Analysis It can be observed from the tabulation that although both figures show a similar trend the real GDP is consistently lower than the Nominal GDP in all the quarters. This can be explained by the adjustments that are done on the gross GDP to arrive at the real GDP. The foremost reason is the inflation adjustment on the real GDP. Inflation adjustment accounts for the change in money value over time. Where money has lost value and therefore more of it is required to purchase the same goods an adjustment for this loss of value is necessary in order to have a correct figure of growth or decline. In case of inflation this is a negative adjustment, the opposite is true in case of appreciation in currency value. This adjustment is necessitated by the need to have comparable figures for different periods. The practice is to obtain real GDP for a given year in relation to the base year by multiplying the nominal GDP by the ratio of