BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -Why Do Economists Favor Real GDP? Real GDP is often favored over nominal GDP as it accounts for the effects of inflation. Thus, if nominal GDP grew at 4% in a given year, but the inflation rate was 5%, it actually shrunk by 1% in real (constant-dollar) terms.

Detailed explanation-2: -Consequently, real GDP provides a more accurate portrait of economic growth than nominal GDP because it uses constant prices, making comparisons between years more meaningful by allowing for comparisons of the actual volume of goods and services without considering inflation.

Detailed explanation-3: -Answer and Explanation: The correct answer is option (ii) Real GDP is not influenced by price changes, but nominal GDP is. Nominal GDP (Gross Domestic Product) is determined by considering the market value of all finished goods and services produced in an economy during a given period.

Detailed explanation-4: -Real GDP. One thing people want to know about an economy is whether its total output of goods and services is growing or shrinking. But because GDP is collected at current, or nominal, prices, one cannot compare two periods without making adjustments for inflation.

Detailed explanation-5: -Real GDP is a macroeconomic statistic that measures the value of the goods and services produced by an economy in a specific period, adjusted for inflation. Essentially, it measures a country’s total economic output, adjusted for price changes.