Multiple Choice
Which of the following best explains the difference between nominal GDP and real GDP?
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11. Gross Domestic Product (GDP) and Consumer Price Index (CPI)
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 type of gross domestic product measures the value of goods and services using current prices?
A
Nominal GDP
B
Real GDP
C
Potential GDP
D
Per capita GDP
Verified step by step guidance1
Understand that Gross Domestic Product (GDP) can be measured in different ways depending on the prices used to value goods and services.
Nominal GDP measures the value of all final goods and services produced within a country using the prices that are current in the year the output is produced.
Real GDP, in contrast, adjusts for changes in price level by using constant prices from a base year, allowing comparison of output across different years without the effect of inflation.
Potential GDP estimates the level of output an economy can produce when operating at full capacity, not directly related to current prices.
Per capita GDP divides the GDP by the population to give an average economic output per person, but it can be either nominal or real depending on the prices used.
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