Which of the following best describes real GDP?

• A. The total market value of all final goods and services produced within a country in a given year, measured at current prices
• B. The value of all final goods and services produced within a country in a given year, adjusted for changes in the price level
• C. The sum of all intermediate goods produced in an economy during a specific period
• D. The value of all goods and services produced by a country's citizens, regardless of location

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of GDP (Gross Domestic Product), which measures the total value of goods and services produced within a country's borders during a specific time period.
2. Step 2: Differentiate between nominal GDP and real GDP. Nominal GDP is measured using current prices, which means it can be affected by changes in the price level (inflation or deflation).
3. Step 3: Recognize that real GDP adjusts nominal GDP to remove the effects of price changes, providing a more accurate reflection of an economy's true output over time.
4. Step 4: Note that real GDP includes only final goods and services to avoid double counting, excluding intermediate goods which are used in the production of final goods.
5. Step 5: Conclude that real GDP is best described as the value of all final goods and services produced within a country in a given year, adjusted for changes in the price level.