ECONOMICS
BUSINESS CYCLES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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It’s adjusted for price changes
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It’s adjusted for depreciation
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It includes unpaid and paid work.
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It includes unrecorded business.
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Detailed explanation-1: -Nominal GDP reflects the raw numbers in current dollars unadjusted for inflation. Real GDP adjusts the numbers by fixing the currency value, thus eliminating any distortion caused by inflation or deflation.
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: -To determine “real” GDP, its nominal value must be adjusted to take into account price changes to allow us to see whether the value of output has gone up because more is being produced or simply because prices have increased.
Detailed explanation-4: -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.
Detailed explanation-5: -Real GDP is a better indicator of economic growth because it can be compared with base year GDP. While nominal GDP cannot be compared to any previous year’s GDP.