This exercise deals with the difference between nominal and real GDP, as well, as the characteristics of the components of GDP over time.- Go to BEA.gov and get Tables 1.1.5 (nominal GDP) and 1.1.6 (real GDP) and download them for the period 1960 to the latest available year in annual frequency.- What is the base year in table 1.1.6?- Plot line 1 of both tables on a single graph. Where do they cross? What is the relationship between real and nominal GDP before and after the crossing point? Why?- Take the natural log of real GDP (line 1) and plot the change in GDP from one year to the next measured by ln(GDP(t)) – ln(GDP(t-1)). (If you multiply by 100, it will be in percentage.) Is there something in the picture that catches your eye? (Hint: look at the volatility of the series.)- Using nominal GDP calculate and plot the GDP shares of Consumption (line 2), Investment (line 7), Government (line 22), and Net Exports (line 15). For example, the consumption share is C/Y or line 2 / line 1. What can you say about these shares?
Nominal and real GDP
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