First you are too vague.
you say economists prefer to use real GDP as a measure of economic well-being.
they all do? if you don't mean "all" then what % do you mean?
also when you prefer to use something you are prefering to use it over something else.
It's like you are asking:
"why do bettors prefer to bet on baseball?"
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you say economists prefer to use real GDP as a measure of economic well-being.
they all do? if you don't mean "all" then what % do you mean?
also when you prefer to use something you are prefering to use it over something else.
It's like you are asking:
"why do bettors prefer to bet on baseball?"
<!-- / message -->
This is a pretty good article comparing Real GDP vs. Nominal GDP.
http://people.ku.edu/~eryilmaz/CH5_National_Income.pdf
Page 3 is where the comparing starts.
http://people.ku.edu/~eryilmaz/CH5_National_Income.pdf
Page 3 is where the comparing starts.
Ok, nominal vs. real.
The problem with dealing with nominal measures of GDP (like you want to in your example) is that the units of measurement become not uniform. You measure 2007's GDP in 2007 US Dollars and then you measure 2008's GDP in 2008 US Dollars.
You make think, "Oh, well that's the same." but *it's not*. Let's say that there was 5% inflation (just using this number for ease of calculation, plus it's not THAT far off).
Then $105 2008 US dollars = $100 2007 US dollars. NOT $105 2007 US Dollars, as you would be saying if you used a nominal measure for GDP.
Real GDP takes into account that 5% inflation and makes it so that you compare the same things: 2008's GDP (in 2007 dollars) and 2007's GDP (in 2007 dollars). Whereas Nominal GDP fails to take that into account and makes you compare different things: 2008's GDP (In 2008 dollars, which may be cheaper) and 2007's GDP (in 2007 dollars).
You cannot accurately compare the results from two time periods without taking into account factors like inflation, and so you MUST use statistics that are REAL rather than NOMINAL for your results to be worth a damn.
Get it?
The problem with dealing with nominal measures of GDP (like you want to in your example) is that the units of measurement become not uniform. You measure 2007's GDP in 2007 US Dollars and then you measure 2008's GDP in 2008 US Dollars.
You make think, "Oh, well that's the same." but *it's not*. Let's say that there was 5% inflation (just using this number for ease of calculation, plus it's not THAT far off).
Then $105 2008 US dollars = $100 2007 US dollars. NOT $105 2007 US Dollars, as you would be saying if you used a nominal measure for GDP.
Real GDP takes into account that 5% inflation and makes it so that you compare the same things: 2008's GDP (in 2007 dollars) and 2007's GDP (in 2007 dollars). Whereas Nominal GDP fails to take that into account and makes you compare different things: 2008's GDP (In 2008 dollars, which may be cheaper) and 2007's GDP (in 2007 dollars).
You cannot accurately compare the results from two time periods without taking into account factors like inflation, and so you MUST use statistics that are REAL rather than NOMINAL for your results to be worth a damn.
Get it?
