Multiple Choice
Which statement best describes the difference between nominal GDP and real GDP?
2
views
10. Measuring National Output and Income
Nominal GDP and Real GDP
Struggling with Macroeconomics?
Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
In macroeconomics, real GDP is GDP in a given year measured using:
A
the consumer price index (CPI) directly instead of quantities and prices of final goods and services
B
that year’s prices
C
base-year prices (constant prices)
D
foreign exchange rates to convert domestic output into dollars
Verified step by step guidance1
Understand that real GDP measures the value of all final goods and services produced in an economy, adjusted for changes in price level to reflect true output rather than price changes.
Recall that nominal GDP is calculated using current year prices, which can be misleading if prices change due to inflation or deflation.
Recognize that to calculate real GDP, we use prices from a specific base year to hold prices constant, allowing us to isolate changes in quantities produced.
Note that the Consumer Price Index (CPI) is a measure of the average price level of a basket of goods and services, but it is not used directly to calculate real GDP.
Conclude that real GDP is calculated by multiplying the quantities of goods and services produced in the current year by the prices from the base year, which are constant prices.
9:15mWatch next
Master Nominal GDP and Real GDP with a bite sized video explanation from Brian
Start learningRelated Videos
Related Practice
Multiple Choice
Which statement best describes the difference between nominal GDP and real GDP?
1
views
Multiple Choice
Which statement best describes the difference between nominal GDP and real GDP?
2
views
Nominal GDP and Real GDP practice set
Problem sets built by lead tutorsExpert video explanations