First, define nominal GDP and real GDP. Second, is it possible for nominal GDP in a year to be less than real GDP in the same year? Explain
What will be an ideal response?
Nominal GDP represents the value of goods and services produced using current prices. Real GDP measures the value of the same goods and services using some base year prices. It is possible for nominal GDP to be less than real GDP in a given year. Given the definitions of the two variables, this will occur if prices in that year are simply less than prices in the base year. If, for example, the base year is 2002, it will generally be the case that nominal GDP will be less than real GDP for those years prior to 2002 given that prices have generally risen in all years.
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Potential GDP is the level of
A) real GDP that the economy would produce if it was at full employment. B) nominal GDP that the economy would produce if it was at full employment. C) real GDP that the economy would produce if there was no inflation. D) nominal GDP that the economy would produce if there was no inflation. E) real GDP that the economy would produce if there was no unemployment.
Suppose that government requires airline companies to have at least 30 airplanes and serve at least 20 different airports. This is an example of
A) safety concerns. B) perfect information. C) barriers to entry. D) labor union power.