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Nominal GDP and Real GDP quiz #1 Flashcards

Nominal GDP and Real GDP quiz #1
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  • How does nominal GDP differ from real GDP?
    Nominal GDP measures the value of final goods and services using current year prices, while real GDP uses constant prices from a base year to account for inflation and focus on changes in production quantity.
  • Which of the following statements is true of real GDP?
    Real GDP holds prices constant by using base year prices, making it a better measure of changes in production over time compared to nominal GDP.
  • When is GDP roughly the same as GNP?
    GDP is roughly the same as GNP when a country's income from abroad is similar to the income paid to foreign factors, but this is not the focus of nominal and real GDP calculations.
  • Which gross domestic product measure uses current dollars?
    Nominal GDP uses current dollars, meaning it is calculated using the prices of goods and services in the current year.
  • GDP measured using base year prices is called what?
    GDP measured using base year prices is called real GDP.
  • Nominal GDP is the market value of what?
    Nominal GDP is the market value of all final goods and services produced within a country in a given period, measured using current year prices.
  • Real GDP refers to what?
    Real GDP refers to the value of final goods and services produced, measured using constant prices from a base year to remove the effects of inflation.
  • Why is GDP not a perfect measure of well-being? For example,
    GDP does not account for non-market activities, environmental quality, income distribution, or leisure, so it may not fully reflect a country's well-being.
  • What is the formula for calculating the value of a single good when computing nominal or real GDP?
    Multiply the quantity of the good by its price; use current year prices for nominal GDP and base year prices for real GDP.
  • Why does the GDP deflator equal 100 in the base year?
    In the base year, both nominal and real GDP use the same prices, so their ratio is 1, and multiplying by 100 gives a GDP deflator of 100.