Real Gross Domestic Product Is An Inflation Adjusted Measure

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Real Gross Domestic Product is an inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year. Real Gross Domestic Product accounts for changes in price level and provides a more accurate figure of economic growth. The government uses Gross Domestic Product as a tool to analyze the economy’s purchasing power and growth over time. This is done by looking at the economic output of two periods and valuing each period with the same average prices and comparing the two together ("Real Gross Domestic Product (GDP) | Investopedia”). The Gross Domestic Product growth rates have declined from the years 2005 to 2008, then increased from the years 2009 to 2010 dramatically, but started to…show more content…
Changes in Consumer Price Index are used to assess price changes associated with the cost of living ("Consumer Price Index | Investopedia”). From the data I collected the Consumer Price Index has been steadily increasing from the years 2005 to 2014, but in 2015 the Consumer Price Index has decreased by 109.719, in 2014 the Consumer Price Index Average was 236.736 then in 2015 the Consumer Price Index Average dropped to 127.017. Inflation is defined as a sustained increase in the general level of prices for goods and services. As inflation rises, every dollar someone owns, buys a smaller percentage of a good or service. There are two types of inflation: Demand-Pull Inflation and Cost-Push Inflation. Demand-Pull Inflation is if demand is growing faster than supply, prices then increase. Cost-Push Inflation is when companies’ costs go up, so increased costs include wages, taxes or increased costs of imports. From the data, I found the year with the highest inflation rate was 2008 with a rate of 3.85 %, the year with the lowest inflation rate was 2015 with a rate of 0.12%. In the year 2009, the inflation rate was negative (-0.34 %) meaning deflation happened ("Consumer Price Index Data from 1913 to 2016”). Deflation is when prices fall because the supply of goods is higher than the demand for those goods. In the year 2009, The Great Recession just happened and people were struggling with money and losing jobs. That explains
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