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# Measuring country wealth. There are two ways to measure the wealth of a country.

Nominal GDP can because it is not adjusted for inflation.It only shows the total value of goods produced in the country at current prices. Real GDP, which is adjusted for inflation cannot increase without the number of goods produced increasing.

Yes, because GDP is a value, so typically if prices inflate the GDP will increase even if the actual number of items is static.

This is the situation in most western countries over the past few decades - most of the work done is increasing services and decreasing actual goods, but the GDPs have continued to rise rapidly. Unlike nominal GDP, real GDP can account for changes in the price level, and provide a more accurate figure.

Let's consider an example. Say in 2004, nominal GDP is \$200 billion. However, due to an increase in the level of prices from 2000 (the base year) to 2004, real GDP is actually \$170 billion. The lower real GDP reflects the price changes while nominal does not

Nominal GDP can because it is not adjusted for inflation.It only shows the total value of goods produced in the country at current prices. Real GDP, which is adjusted for inflation cannot increase without the number of goods produced increasing.

The production approach is also called as Net Product or Value added method. This method consists of three stages: The sum of Gross Value Added in various economic activities is known as GDP at factor cost. GDP at factor cost plus indirect taxes less subsidies on products is GDP at Producer Price. For measuring gross output of domestic product, economic activities (i.e. industries) are classified into various sectors. After classifying economic activities, the gross output of each sector is calculated by any of the following two methods: 1. By multiplying the output of each sector by their respective market price and adding them together and

2. By collecting data on gross sales and inventories from the records of companies and adding them together. Subtracting each sector's intermediate consumption from gross output, we get sectoral Gross Value Added (GVA) at factor cost. We, then add gross value of all sectors to get GDP at factor cost. Adding indirect tax less subsidies in GDP at factor cost, we get GDP at Producer Prices.

Income approach
Another way of measuring GDP is to measure total income. If GDP is calculated this way it is sometimes called Gross Domestic Income (GDI), or GDP(I). GDI should provide the same amount as the expenditure method described above. (By definition, GDI = GDP. In practice, however, measurement errors will make the two figures slightly off when reported by national statistical agencies.)