What is the difference between real and nominal GDP? If the president of the United States (or your instructor) asked you to evaluate the economy over the past five years, which one would you use and why?
Real GDP is nominal GDP adjusted for the effects of inflation. Mathematically, real GDP (in constant base-year dollars) equals nominal GDP multiplied by 100 divided by the GDP deflator. An increase in nominal GDP may be due to increases in production of goods and services, or it may simply be due to an increase in prices. For this reason, real GDP is a better variable for evaluating the performance of the economy over several years.
You might also like to view...
The process in which an exporter sells a good to a country at a price below its own production costs is:
A) tariffing. B) rationing. C) trading. D) dumping.
If the price of good X increases and this causes an increase in the demand for good Y, then goods X and Y are substitute goods
a. True b. False Indicate whether the statement is true or false