Multiple Choice
Which statement best describes the difference between nominal GDP and real GDP?
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10. Introducing Economic Concepts
Introducing Concepts - Nominal GDP and Real GDP
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Which of the following is NOT included in U.S. GDP?
A
The value of cars produced by a U.S. company in Germany
B
The value of new homes built in California
C
The value of computers manufactured in Texas
D
The value of restaurant meals sold in New York
Verified step by step guidance1
Recall the definition of Gross Domestic Product (GDP): it measures the total market value of all final goods and services produced within a country's borders during a specific time period.
Identify that GDP includes only production that occurs within the geographic boundaries of the country, regardless of the nationality of the company producing the goods or services.
Analyze each option to determine if the production occurs within the U.S. borders: new homes built in California, computers manufactured in Texas, and restaurant meals sold in New York are all produced within the U.S., so they are included in U.S. GDP.
Recognize that cars produced by a U.S. company in Germany are produced outside the U.S. borders, so their value is not included in U.S. GDP but rather in Germany's GDP.
Conclude that the value of cars produced by a U.S. company in Germany is NOT included in U.S. GDP because GDP measures domestic production, not production by domestic companies abroad.
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