Multiple Choice
If real GDP declines in a given year, nominal GDP:
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10. Introducing Economic Concepts
Introducing Concepts - Nominal GDP and Real GDP
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which of the following statements about Gross Domestic Product (GDP) is correct?
A
GDP excludes all government spending from its calculation.
B
GDP can be used to measure the economy's income.
C
GDP only measures the value of exports in an economy.
D
GDP cannot be used to measure the economy's income.
Verified step by step guidance1
Step 1: Understand what Gross Domestic Product (GDP) represents. GDP is the total market value of all final goods and services produced within a country in a given period.
Step 2: Recall the components included in GDP calculation. GDP includes consumption, investment, government spending, and net exports (exports minus imports). Therefore, government spending is included, not excluded.
Step 3: Recognize that GDP measures the value of all final goods and services produced domestically, not just exports. Exports are part of GDP but not the only component.
Step 4: Understand the relationship between GDP and national income. GDP can be used to measure the economy's income because the total value of production corresponds to the total income earned by factors of production in the economy.
Step 5: Conclude that the correct statement is that GDP can be used to measure the economy's income, while the other statements are incorrect based on the definitions and components of GDP.
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Introducing Concepts - Nominal GDP and Real GDP practice set
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