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Real and Nominal GDP Forecasts Taking on account the historical data provided in the forecasts developed by our Economic Research Group, we compared this year’s forecasts with the performance of the economy in the past using gross domestic product. Gross domestic product, “measures the monetary value of final goods and services—that is, those that are bought by the final user—produced in a country in a given period of time (say a quarter or a year)” according to the International Monetary Fund. Based on this comparison, we determined that there has been a steady increase in gross domestic product (GDP) in terms of Current Dollars, but there is a fluctuation between quarters under Chained Dollars GDP. Current Dollars, also known as Nominal GDP, accounts for inflation changes and uses current market prices while Chained Dollars, known as Real GDP, remove the effects of inflation in its calculation and use prices from a base year. Using this data, we can project the real growth rate for 2006 will decrease -2.56% quarterly, and -10.25% within the year, shown in Exhibit 2b. We calculate the average growth rate using Real GDP because in the “United States the growth rate that the BEA reports is a quarter-on-quarter growth rate, which is the growth in real GDP from one-quarter to the next,” according to The Motley Fool. These percentages tell us that there has been a significant drop in real growth rates due to consumer confidence falling for the second month straight.

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