Question
GDP can be expressed in two ways: nominal and real. Nominal GDP is the sum of goods and services at current market prices. Inflation is the amount that prices increase over time. When looking at nominal GDP, inflation can make GDP today look larger. This is true even if GDP is actually decreasing when you account for inflation. As goods and services generally get more expensive over time, nominal GDP isn’t as useful as real GDP, which is adjusted for inflation.
Real GDP uses a base year to establish a set price for all goods and services. The base-year prices are then applied to other years, so that GDP is always calculated with the same prices. Real GDP focuses on production volume. It looks at how many goods and services are produced instead of how much the goods and services cost. Real GDP makes it possible to compare the GDP of a nation from one year to the next without inflation interfering.
Unlike nominal GDP, real GDP
A
is not adjusted for inflation.
B
does not establish a set price for all goods and services.
C
looks at how many goods and services are produced instead of how much those goods and services cost.
D
looks at the cost of goods and services instead of how many goods and services are produced.
Back
Real GDP uses a base year to establish a set price for all goods and services. The base-year prices are then applied to other years, so that GDP is always calculated with the same prices. Real GDP focuses on production volume. It looks at how many goods and services are produced instead of how much the goods and services cost. Real GDP makes it possible to compare the GDP of a nation from one year to the next without inflation interfering.
Unlike nominal GDP, real GDP
A
is not adjusted for inflation.
B
does not establish a set price for all goods and services.
C
looks at how many goods and services are produced instead of how much those goods and services cost.
D
looks at the cost of goods and services instead of how many goods and services are produced.
Back
Answers
GPT-4o mini
The correct answer is:
**C. looks at how many goods and services are produced instead of how much those goods and services cost.**
Real GDP focuses on the production volume and is adjusted for inflation, allowing for meaningful comparisons across different years.
**C. looks at how many goods and services are produced instead of how much those goods and services cost.**
Real GDP focuses on the production volume and is adjusted for inflation, allowing for meaningful comparisons across different years.