Today we will go over the problem set on calculating nominal GDP and real GDP that you did for homework. We will start class today with you working cooperatively with a partner to find a solution to the "Problem of the Day" and then there will be a lecture on our next topic. This page contains all the information you need for today's class: homework, the problem of the day, helpful resources (videos, podcasts, etc.) and an explanation of the activities we will do in class. Use the table of contents on the right to help you navigate.
Read Mankiw (Chapter 23) and watch the following videos, if you need help with the problem set.
Problem of the Day: You will work cooperatively with your partner to construct a response to the following prompt.
Use a numerical example to explain how inflation makes nominal GDP an unreliable statistic in comparing a country's GDP in two different time periods.
Assume that there is a ceiling on the price of rice in Eaglestan.
Use a supply and demand diagram to show the logic behind why a black market may develop in Eaglestan.
Explain how the existence of the black market in rice makes the official GDP figure in Eaglestan a less reliable measure of economic well-being there.
Problem Set: We will spend the rest of class going over the problem set you did for homework, being sure that you understand the distinction between real and nominal GDP and can calculate them.