VIEWS: 127 PAGES: 2 CATEGORY: Economics POSTED ON: 5/28/2009
Crisp idea of Inflation deflation and GDP. Very helpful for understanding difference in these three and how they are calculated.
Inflation Inflation is increase in supply of money without increase in the supply of good and services. deflation, a general falling level of prices; disinflation, the reduction of the rate of inflation hyper-inflation, an out-of-control inflationary spiral stagflation, a combination of inflation and rising unemployment Examples of common measures of inflation include: Consumer price indices (CPIs) which measures the price of a selection of goods purchased by a "typical consumer." Cost-of-living indices (COLI) which often adjust fixed incomes and contractual incomes based on measures of goods and services price changes. Producer price indices (PPIs) which measure the price received by a producer. This differs from the CPI in that price subsidization, profits, and taxes may cause the amount received by the producer to differ from what the consumer paid. There is also typically a delay between an increase in the PPI and any resulting increase in the CPI. Producer price inflation measures the pressure being put on producers by the costs of their raw materials. This could be "passed on" as consumer inflation, or it could be absorbed by profits, or offset by increasing productivity. Wholesale price indices, which measure the change in price of a selection of goods at wholesale, prior to retail mark ups and sales taxes. These are very similar to the Producer Price Indices. Commodity price indices, which measure the change in price of a selection of commodities. In the present commodity price indices are weighted by the relative importance of the components to the "all in" cost of an employee. GDP Deflator measures price increases in all assets rather than some particular subset. The term "deflator" in this case means the percentage to reduce current prices to get the equivalent price in a previous period. The US Commerce Department publishes a deflator series for the U.S. economy. Gross Domestic Product - A measure of the value of goods and services. A region's gross domestic product, or GDP, is one of the ways for measuring the size of its economy. The GDP of a country is defined as the total market value of all final goods and services produced within a country in a given period of time (usually a calendar year). produced in a year. That GDP (or GDI - Gross Domestic Income) being concerned with the region in which income is generated. is, what is the market value of all the output produced in a nation, the United States, for example, in one year. GDP concerns itself with where the output is produced and not who .produced it. Meanwhile, GNP (or GNI - Gross National Income) is a measure of the accrual of income or the value of the output, produced by the "nationals" of a region. GNP concerns itself with who "owns" the production. If we take the USA as an example again, GNP measures the value of output produced by American firms, regardless of where the firms are located. This compares to GDP which is concerned with where the production takes place and not if the company is an American firm or not
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