Asked by Chantal Taylor on Jul 04, 2024
Verified
GDP can increase at a faster rate than real GDP
A) only if there is a decline in the price level.
B) only if the unemployment rate is increasing.
C) only if the value of the dollar is stable.
D) only if the population is growing.
E) only if there is inflation.
Real GDP
The measure of a country's economic output adjusted for price changes (inflation or deflation), providing a more accurate reflection of an economy's size and growth.
Price Level
The average of the current prices of goods and services in an economy, which can influence purchasing power and inflation.
Inflation
The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly.
- Contrast nominal Gross Domestic Product with real Gross Domestic Product, and explain the phenomena of inflation and deflation.
- Gain insight into how inflation and deflation affect the Gross Domestic Product and the real Gross Domestic Product.
Verified Answer
AR
Andrew Ronald VarjabedianJul 06, 2024
Final Answer :
E
Explanation :
GDP can increase at a faster rate than real GDP only if there is inflation. This is because GDP includes all goods and services produced, regardless of changes in prices, while real GDP adjusts for inflation so it reflects changes in the quantity of goods and services produced. Therefore, if there is inflation, GDP can increase at a faster rate than real GDP as prices rise and the nominal value of goods and services produced increases.
Learning Objectives
- Contrast nominal Gross Domestic Product with real Gross Domestic Product, and explain the phenomena of inflation and deflation.
- Gain insight into how inflation and deflation affect the Gross Domestic Product and the real Gross Domestic Product.