ECONOMICS
BUSINESS CYCLES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Increases in the price level, as indicated by the GDP chain price index
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Increases in fictional GDP
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Increases in real GDP
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Increases in the labor force
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Detailed explanation-1: -GDP, the most popular way to measure economic growth, is calculated by adding up all of the money spent by consumers, businesses, and the government in a given period. The formula is: GDP = consumer spending + business investment + government spending + net exports.
Detailed explanation-2: -An increase in real GDP is not necessarily economic growth Economic growth means that an economy has increased its ability to produce more. When an economy is producing beyond potential output, it might have experienced an increase in real GDP, but that is not economic growth.
Detailed explanation-3: -Economic growth refers to an increase in the size of a country’s economy over a period of time. The size of an economy is typically measured by the total production of goods and services in the economy, which is called gross domestic product (GDP). Economic growth can be measured in ‘nominal’ or ‘real’ terms.