ECONOMICS
GDP
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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is adjusted for changes in the volume of intermediate transactions.
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includes the economic effects of international trade.
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has been adjusted for changes in the price level.
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excludes depreciation charges.
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Detailed explanation-1: -Real GDP accounts for the price of goods or services produced at a given time that has been adjusted for inflation while nominal GDP on the other hand takes in account the current prices of the goods; therefore the inflation adjustment is not required in nominal GDP.
Detailed explanation-2: -Real GDP tracks the total value of goods and services calculating the quantities but using constant prices that are adjusted for inflation. This is opposed to nominal GDP, which does not account for inflation.
Detailed explanation-3: -While nominal GDP by definition reflects inflation, real GDP uses a GDP deflator to adjust for inflation, thus reflecting only changes in real output. Since inflation is generally a positive number, a country’s nominal GDP is generally higher than its real GDP.
Detailed explanation-4: -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-5: -Nominal GDP growth is driven both by changes in real economic activity and by changes in prices. The difference between nominal and real GDP growth shown below is accounted for by inflation. Haver Analytics/BEA.