Asked by Brigitte Rodrigues on May 13, 2024
Verified
If over a certain period of time "constant dollar" GDP grows more rapidly than "current dollar" GDP,this means that
A) the economy is in a recession.
B) the general price level has risen.
C) the general price level has fallen.
D) consumers' real incomes have decreaseD.
Constant Dollar
A term used to describe the value of currency after adjusting for inflation, reflecting purchasing power across different time periods by removing the effects of price changes.
Current Dollar
A term used to describe the nominal monetary value of goods, services, or financial assets at the current time, without adjustment for inflation.
- Appreciate the connection amongst nominal GDP, real GDP, and the GDP deflator as barometers of economic status.
Verified Answer
AP
Avadh PatelMay 15, 2024
Final Answer :
C
Explanation :
When "constant dollar" GDP grows more rapidly than "current dollar" GDP, it indicates that the volume of goods and services produced has increased at a faster rate than prices, implying that the general price level has fallen. Constant dollar GDP is adjusted for inflation and reflects real growth, whereas current dollar GDP is not adjusted and reflects both price changes and real growth.
Learning Objectives
- Appreciate the connection amongst nominal GDP, real GDP, and the GDP deflator as barometers of economic status.