221. Describe what else can be used instead of money as a store of value

235. Explain what real GDP means.
Explain what real GDP means.

What is real GDP?

Real GDP is a measure of a country’s gross domestic product that has been adjusted for inflation. Contrast this with nominal GDP, which measures GDP using current prices, without adjusting for inflation. While the two indices measure the same output, they are used for very different purposes: changes in value versus changes in volume.

Deeper definition

GDP is the most important way to take a country’s economic temperature. It totals the monetary value of all goods and services produced in a given time period, less the value of the goods and services used up in production. Both corporations and small businesses rely on GDP to plan for the future. Investors use it to help estimate profit margins and make financial decisions. Economists use it to aid forecasting and gain insight into the economy.

Nominal GDP

The regular pulse of prices rising and falling (mostly rising) is captured by nominal GDP, which tracks growth in value of an economy over time. If overall gross domestic product rises 3 percent in a year and inflation runs at 2 percent over the same period, nominal GDP will be +5 percent for that year.
When comparing GDP to other economic data that are not adjusted for inflation, nominal GDP is the preferred figure. For instance, debt is always presented as a nominal amount, so debt-to-GDP ratios are calculated using nominal GDP data. Keep in mind that nominal GDP can provide an inaccurate picture of economic growth exactly because inflation is baked into the data.

Real GDP

Real GDP provides a more precise picture of a nation’s rate of economic growth. The GDP deflator is utilized to adjust the data for inflation, allowing you to understand how much economic output has grown (or contracted) independent of price changes.
When calculating real GDP, a base year is selected to control for inflation; the real GDP figures capture the quantities of goods produced in different years using the prices from the same base year. The different real GDP figures from various years reflect changes in volume rather than value.
Check out GDP and all the latest U.S. economic data on Bankrate.com.
236. Explain what personal income means
Definition of personal income
: the current income received by persons from all sources excluding transfers among persons —used especially in national income accounting
Three Types of Income
Income #1: Earned Income.
Income #2: Investment Income.
Income #3: Passive Income.
PI = NI + Income Earned but not Received + Income Received but not Earned
PI = Personal Income.
NI = National Income.
Nominal personal income (NPI) - refers to the amount of income received from all types of activities. Taxes and mandatory costs are not included. It is mainly about money, that makes a personal budget and that we get on hand.