ECONOMICS
ECONOMIC GROWTH
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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It includes inflation
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It shows how incomes are distributed in the economy
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It includes economic and non economic factors
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It only includes non-economic factors
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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: -The main metric has been differences in income or gross domestic product per person. But economists have long known that GDP is an imperfect measure of well-being, counting just the value of goods and services bought and sold in markets.
Detailed explanation-3: -The key differences between GDP and aggregate economic well-being are: 1. GDP excludes most home production, and other “non-market” activities such as leisure, even though most such activity effectively increases the true consumption of households and thus enhances welfare (more discussion of this point below). 3.