The combined (federal, state, local) top corporate income tax rate in the United States is 39.2%. It's the highest in the world. The top rate in Japan is 38%. The top rate in Switzerland is 22%. The top rate in Brazil is 25%. The top rate in Mexico is 30%. The top rate in Canada is 34% (http://www.huffingtonpost.com/2012/03/30/us-corporate-tax-rate_n_1392310.html).
|Section 3: Real versus Nominal Gross Domestic Product|
|Macroeconomics - Unit 3|
Nominal Gross Domestic Product
Nominal GDP is GDP using current quantities and current dollars. It is calculated by multiplying the number of products by their current prices. An increase in nominal GDP does not necessarily represent an increase in production. If prices double from one year to another and production remains the same, nominal GDP will double.
Real Gross Domestic Product
Real GDP is GDP using current quantities and so-called constant dollars. It is calculated by multiplying the number of products by constant prices from a base year. For example, we can select the year 2000 as the "base year," and calculate real GDP in other years by using prices from the year 2000. Real GDP, thus, only measures the changes in the volume of production. This is a better indicator of economic activity and economic health.
The solution is given in the table below:
The above table shows that nominal GDP rises from $7,000 in year 1 to $8,880 in year 2. Real GDP also rises, but not by as much (because of the adjustment for price increases). It is $7,000 in year 1, and rises to $7,400 in year 2.
The Fisher Formula
Recently, our government has used a different way to calculate real GDP. Instead of using a certain base year for calculation of real GDP of all years, a so-called "Fisher formula" that incorporates price and quantity weights from two adjacent years or quarters, is used. These annual or quarterly changes are "chained" (multiplied) together to form time series of quantity and price indexes. For more information, click here for Bureau of Economic Analysis GDP calculations and explanations: BEA (http://www.bea.gov). For our purposes, the idea or concept of the difference between nominal and real GDP is the same whether you use base years or chained weights.
United States Nominal and Real GDP Throughout the Years
The table below shows United States Bureau of Economic Analyis selected annual nominal and real GDP data for the United States from 1930 through 2011, in chained year 2005 dollars rounded to the nearest whole dollar amount (in billions). Both nominal and real GDP in the United States have grown considerably over the decades. Due to the recession, real GDP fell from 2008 to 2009, but grew again after 2009.
|Last Updated on Tuesday, 25 December 2012 11:32|