Data Execercise for Priciples of Macroeconomics - Assignment Example

The Real GDP between these two periods reduces by 3.5%. Inflation and changes in prices of products causes a significant difference between nominal and real GDP percentages (Bea.gov, 2015). With nominal GDP and real GDP values, one can derive an index of the price level in the year. This index is referred to as GDP deflator and its formula is given by: Real GDP values are not impacted by changes in prices; it is only affected if there are changes in the quantity. To determine the purchasing power of an economy with price adjustments real GDP values are used.

Nominal GDP values are used to determine the total value of services or products produced in an economy within one year (Bea.gov, 2015). Gross Domestic Product is an approximated value of the total amount of a country’s products and services, within its boundary, by its citizens and foreigners, calculated over a one-year period. Whereas Gross National Product is an approximated value of the total amount of services and products, by citizens of the country, within its lands or on foreign territories, computed over the course of one year (Bea.gov, 2015).

GDP is used to assess the strength of a country’s economy, whereas GNP is used to assess the economic performance of citizens of a certain country. Both these values can also be used in analyzing the distribution of wealth in the economy or also calculating average purchasing power of a person in a country (Bea.gov, 2015). National income is the total value of a countrys output production of new services and goods produced in one year. It measures the monetary value of the production output of services and goods produced in an economy over a period (Bea.gov, 2015).

The National income was higher than GNP. To determine NI from GNP you use the following formula, GNP= GDP + NR (Net income from assets abroad (income receipts). Depending on the factors, GNP can be either lower or higher than GDP. The ratio of domestic to