Explain the difference between nominal GDP and real GDP. Which is more important when using GDP as a measure of production? Why?
What will be an ideal response?
Nominal GDP is the value of final goods and services using current-year prices. Real GDP is the value of final goods and services using base-year prices. Real GDP is more important when using GDP as a measure of production. Real GDP keeps prices constant when comparing production for different years. By keeping prices constant, changes in real GDP figures represent changes in the quantity of goods and services produced.
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Milton Friedman and Edmund Phelps questioned
A) the use of expectations in the Phillips curve. B) the stability of the relationship between inflation and unemployment. C) the existence of a natural rate of unemployment. D) the existence of a full-employment level of output.