GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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changes in price
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phases of the business cycle
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increases in unemployment
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decreases in exports
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Detailed explanation-1: -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: -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-3: -Changes in nominal GDP, GDP measured in current or nominal prices, can be caused by changes in prices or output. 2. Changes in real GDP, GDP measured in constant prices, can only be caused by a change in output.
Detailed explanation-4: -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.