question
Who are lenders?
answer
People who lend money at fixed interest rates, such as banks
question
Who are borrowers?
answer
People who borrow money, such as a firms
question
Who does inflation hurt?
answer
if inflation is above the fixed rate of interest it hurts lenders
question
Who does inflation benefit?
answer
Borrowers, since they pay back money that is worth less.
question
Define Nominal GDP:
answer
GDP measured in current prices (not adjusted for inflation)
question
Define Real GDP
answer
GDP expressed in unchanging dollars (adjusted for inflation)
question
Why is Real GDP better than Nominal GDP?
answer
Real GDP is measuring actual growth
question
What is the GDP Deflator?
answer
It measures the changes in prices of ALL goods/services produced
question
What equation is used to calculate the GDP Deflator?
answer
GDP Deflator = (Nominal GDP / Real GDP) x 100
question
What equation is used to calculate the Nominal GDP?
answer
Nominal GDP = (GDP Deflator x Real GDP) / 100
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