Unlocking the Mystery to Measuring GDP
Looking for a fresh, new way to teach the calculation of real GDP, nominal GDP, and the GDP deflator? This lesson allows students to "unlock" the mystery behind the math by reaching answers that open a combination lock and solve a historical timeline puzzle.
Distinguishing between real and nominal gross domestic product (GDP) and being able to calculate the GDP deflator are key concepts of most macroeconomics classes, although they can sometimes pose a challenge for students who are less than proficient at math. In this lesson, students will be introduced to real and nominal GDP and the GDP deflator, learn how to calculate these indicators using simplified examples, and practice an activity using real combination locks that will open when students have correctly solved the answers. In the assessment, students will be given two problem sets to calculate nominal and real GDP and the GDP deflator, and they will use their answers to solve a "mystery" timeline of economically significant historical events.
Standards and Benchmark
- Voluntary National Standards in Economics, Standard 18: Economic Fluctuations: Fluctuations in a nation's overall levels of income, employment, and prices are determined by the interaction of spending and production decisions made by all households, firms, government agencies, and others in the economy. Recessions occur when overall levels of income and employment decline.
- Benchmarks Grade 8: GDP is a basic measure of a nation's economic output and income. It is the total market value, measured in dollars, of all final goods and services produced in the economy in one year.
- Benchmarks Grade 12: An increase in nominal GDP might reflect increases in the production of goods and services and also increases in prices. GDP adjusted for price changes is "real GDP." Real GDP per capita allows comparison of material living standards over time and among different countries.
- Base Year
- Constant Prices
- Economic Growth
- Gross Domestic Product (GDP)
- GDP Deflator
- Nominal GDP
- Price Level
- Real GDP
Students will be able to
- define real and nominal GDP and distinguish between the two
- calculate nominal and real GDP using simple mathematical examples and
- define and calculate the GDP deflator using simple mathematical examples.
60 minutes (40 minutes for the lesson and activity and 20 minutes for the assessment)