The point at which the nominal and real GDP cross is at the base year
The point at which the nominal and real GDP cross is at the base year. The reference base year for the derived data is 2012. The reason for the two GDP crossing is that real GDP is mainly stated at the base year price. Therefore, in the base year, both real and nominal GDP are equal. Using the case pulled from the Bureau of Economic Statistics, real GDP is computed from the chained 2012 prices, hence it merging with nominal GDP at the base year.
From the graph above, it is evident that the real GDP is higher than the nominal GDP before 2012. After a base year (2012), the nominal GDP is higher than the real GDP. The change in trend between the real and nominal GDP can be explained mainly by inflation. Since inflation is mainly positive, the prices are expected to rise from year to year. As a result, the nominal GDP is automatically adjusted to the base year prices thus increasing the prices after 2012. However, before 2012 the prices are lower but increasing from 1960 through 2011. Economically, after making a positive price adjustment to the nominal GDP, it is expected that the real GDP will fall below or start decreasing.
National savings mainly comprise of both the public saving and the private savings. In macroeconomic terms, savings is the difference between income and consumption. On the other hand, net export is the difference between exports and imports.