Page 58 - Introduction to Business

32 PART 1 The Nature of Contemporary Business

For example,
U.S. nominal GDP in 2001 U.S. $10,082.2 billion
U.S. real GDP in 2001
GDP deflator in 2001 1.101
U.S. $9,157.3 billion in 1995 prices (real GDP in
1995 prices)

When financial media like the Financial Times or The Wall Street Journal report
economic growth in the United States or Japan or in any other country, the refer-
ence is to real GDP growth and not nominal GDP growth. Changes in nominal eco-
nomic growth will include inflation for the period under consideration. Nominal
GDP growth rates will provide a distorted view of GDP growth, especially for coun-
tries with high inflation rates.

EXHIBIT 1.8
U.S. Nominal and Real GDP, 1985—2001 (US$ billions)
Nominal GDP grows faster than real GDP because of inflation.

Nominal GDP GDP Deflator Real GDP

1985 4,213.0 75.1 5,609.9

1986 4,452.9 76.8 5,798.0

1987 4,742.5 79.1 5,995.6
1988 5,108.3 81.8 6,244.9

1989 5,489.1 84.9 6,465.4

1990 5,803.2 88.2 6,579.6

1991 5,986.2 91.4 6,549.5

1992 6,318.9 93.6 6,751.0

1993 6,642.3 95.9 6,926.3

1994 7,054.3 97.9 7,205.6
1995 7,400.5 100.0 7,400.5

1996 7,813.2 101.9 7,667.5

1997 8,318.4 103.9 8,006.2

1998 8,781.5 105.2 8,347.4

1999 9,274.3 106.7 8,691.9

2000 9,824.6 108.6 9,046.6

2001 10,082.2 110.1 9,157.3

Source: International Monetary Fund, International Financial Statistics Yearbook, 2002.

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