BDforever
ELITE MEMBER
- Joined
- Feb 12, 2013
- Messages
- 14,387
- Reaction score
- 8
- Country
- Location
Economics 101: The GDP list which is published by the IMF is that of Nominal GDP or GDP at current prices, that means cost of all the production within a country in current prices of present year, it has nothing to do with what BASE year you select (you can make it 2050 if you want), so as per IMF, the current nominal GDP of BD is $118 billion.
The thing you are talking about is GDP at Constant prices.
OECD Glossary of Statistical Terms - Gross domestic product (GDP) – current prices Definition
you need to know there is a connection between GDP and base year.
GDP, or Gross Domestic Product is the value of all the goods and services produced in a country. The Nominal Gross Domestic Product measures the value of all the goods and services produced expressed in current prices. On the other hand, Real Gross Domestic Product measures the value of all the goods and services produced expressed in the prices of some base year. An example:
Suppose in the year 2000, the economy of a country produced $100 billion worth of goods and services based on year 2000 prices. Since we're using 2000 as a basis year, the nominal and real GDP are the same. In the year 2001, the economy produced $110B worth of goods and services based on year 2001 prices. Those same goods and services are instead valued at $105B if year 2000 prices are used. Then:
Year 2000 Nominal GDP = $100B, Real GDP = $100B
Year 2001 Nominal GDP = $110B, Real GDP = $105B
Nominal GDP Growth Rate = 10%
Real GDP Growth Rate = 5%
Once again, if inflation is positive, then the Nominal GDP and Nominal GDP Growth Rate will be less than their nominal counterparts. The difference between Nominal GDP and Real GDP is used to measure inflation in a statistic called The GDP Deflator.
Special note: The base year is very important in three respects. Firstly, the GDP estimates will be expressed in constant prices for the base year. Second, the index number applies, so that a sector that was very economically important in the base year will continue to appear very important despite structural changes that may have occurred since the last base year.
Conversely, sectors that were unimportant or not even existing will barely have an impact on the official statistics. Finally, the data sources and the use of proxies are set in the base year. Even when new information is becoming available, national accountants may be unwilling or unable to add this data to the GDP series. Thus, when the base year is out of date, the GDP series becomes an increasingly unreliable guide to interpreting real economic change. The IMF statistical division recommends a change of base year every fifth year.
Important question: Which is a better measure of economic well-being real GDP or Nominal GDP?
Answer:
Well real GDP takes into account the inflation rate and thus is more accurate at recording the actual increase in production activities. Therefore Real GDP is better.
Real GDP better measure of economic well-being.Because Real GDP is not affected by changes in prices, changes in real GDP reflects only changes in the amount being produced.