Multiple Choice
Which of the following is true of 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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Which of the following primarily determines the level of real GDP in an economy?
A
The general price level
B
The amount of money in circulation
C
The nominal wage rate
D
The quantity of goods and services produced
Verified step by step guidance1
Understand that real GDP measures the total quantity of goods and services produced in an economy, adjusted for changes in the price level.
Recognize that the general price level affects nominal GDP but not real GDP directly, since real GDP is adjusted to remove price effects.
Note that the amount of money in circulation influences nominal variables like the price level and inflation, but does not directly determine real GDP.
Consider that the nominal wage rate is a cost factor for production but does not by itself determine the total output or real GDP.
Conclude that the primary determinant of real GDP is the actual quantity of goods and services produced, reflecting the economy's productive capacity.
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