Which of the following situations best illustrates the use of GDP data?

• A. Determining the inflation rate for consumer goods
• B. Measuring the unemployment rate in a single country
• C. Comparing the economic output of two countries over time
• D. Assessing the distribution of income among households

Answer: (C)

Verified step by step guidance

1. Step 1: Understand what GDP (Gross Domestic Product) measures. GDP represents the total monetary value of all final goods and services produced within a country's borders in a specific time period.
2. Step 2: Recognize that GDP data is primarily used to assess the overall economic output and growth of a country, which allows for comparisons of economic performance either over time within the same country or between different countries.
3. Step 3: Analyze each option in the problem: Determining the inflation rate involves price level changes, which is related to the Consumer Price Index (CPI), not GDP directly.
4. Step 4: Measuring the unemployment rate focuses on labor market conditions and is derived from labor force surveys, not GDP data.
5. Step 5: Assessing income distribution involves looking at how income is spread across households, which is typically done using data like the Gini coefficient or income quintiles, not GDP figures. Therefore, the best use of GDP data is comparing the economic output of two countries over time.