2
answers
0
watching
1,857
views
11 Dec 2019
Why is real GDP a more accurate measure of an economy's production than nominal GDP?
(i) Nominal GDP is adjusted for the effects of inflation or deflation, whereas real GDP is not.
(ii) Real GDP is not influenced by price changes, but nominal GDP is.
(iii) Real GDP measures the value of the goods and services an economy produces, but nominal GDP measures the value of the goods and services an economy consumes.
Why is real GDP a more accurate measure of an economy's production than nominal GDP?
(i) Nominal GDP is adjusted for the effects of inflation or deflation, whereas real GDP is not.
(ii) Real GDP is not influenced by price changes, but nominal GDP is.
(iii) Real GDP measures the value of the goods and services an economy produces, but nominal GDP measures the value of the goods and services an economy consumes.
Jeffrey
JD Candidate at Stanford Law School14 Apr 2020
Answer verification
This is a step by step verification of the answer by our certified expert.
Subscribe to our livestream channel for more helpful videos.
Related textbook solutions
Related questions
Consider a simple economy that only produces two goods; apples and oranges. The following table shows prices and quantities over a 3 year period.
|
Price of |
Quantity of |
Price of |
Quantity of |
|
|
YEAR |
Apples |
Apples |
Oranges |
Oranges |
|
2012 |
2 |
20 |
1 |
10 |
|
2013 |
3 |
24 |
2 |
12 |
|
2014 |
4 |
30 |
3 |
20 |
Use the information from the previous table to fill out the following table:
|
Real GDP |
GDP |
||
|
YEAR |
Nominal GDP ($) |
(The base year 2012)($) |
Deflator |
|
2012 |
|||
|
2013 |
|||
|
2014 |
Choose one from each:
From 2013 to 2014, nominal GDP (increased or decreased) and real GDP (increased or decreased).
The inflation rate in 2014 was (10%, 40.6%, 29.4%, -28.9%, or -9.1%).
Why is real GDP a more accurate measure of an economyâs production than nominal GDP?
