Understanding Property Markets - Essay Example

Understanding Property Markets On the other hand, real GDP is computed by dividing the nominal GDP by the price index or inflation for that year. That makes it real because it is being adjusted for the price level at the time of measurement. The pattern of nominal and real GDP showed that there was an increasing GDP from 1948 to 2008 but a little decrease in the next years. The gap between the nominal and real GDP shows the difference in the price level over the years. As the graph shows, the large gap between the red and blue curves means that there was a high rate of inflation during those years.

So, when even if nominal GDP is reported at high volumes, once it is adjusted to the high price index it will result to lower real GDP. The estimates of the long-run annual growth rates of nominal and real GDP will help us determine the future growth rate of UK economy. We can also see how the UK economy is expected to perform in the coming years through these estimates. This will also help other sectors of the economy in deciding about their participation in the economic activities. As the estimates show rising growth rates, we can speculate that UK economy is also in rising position as to economic growth is concerned.

The Gross Domestic Product (GDP) in the United Kingdom expanded 0.70 percent in the last quarter of 2010 over the previous quarter. From 1955 until 2010 The United Kingdom's average quarterly GDP Growth was 0.59 percent reaching an historical high of 5.30 percent in March of 1973 and a record low of -2.50 percent in March of 1974.. Economic fluctuations and economic growth are related (McConnell,Brue, p. 114, 2005). During recessions, consumer spending is reduced or lower but in economy’s recovering period income can be increased as production also increases.

The manufacturing sector is being driven by exports, not least to the growth areas on the far side of the globe, but the service sector is suffering from a lack of confidence with consumer spending being reined in (www.bbc.co.uk, 2011). From the figures given, we can say that the real GDP can fall because of the small standard deviation. Standard deviation is used to measure the volatility of the business cycle or economic fluctuations. As business cycles become less volatile, economic growth is also in slower rate.

But if the volatility will be higher, the economy will be in good position. The graph shows the UK quarterly growth rate in percentage. The quarterly percentage change marked at positive rate shows the increasing rate of outputs of goods and services. This may be the times of peak for an economy. For during these times the economy is at full employment, real output is at economy’s capacity and prices may be at high level. But quarterly percentage change marked at negative may present the economy’s recession.

This means that at these times there is no economic growth attained because of decreasing output or real GDP. Contrary to the peak phase, recession may bring output at its lowest level. But if the economy can recover, the output may rise again through the increase in production and price levels. Annual economic growth rate can be examined through the annual changes in real and nominal GDP. These changes can tell us about the economy’s level of performance