Asked by Brandon Morrone on Jul 20, 2024
Verified
If prices rise more quickly than output between 1998 and 2003,then in 2003
A) GDP will be higher than real GDP in 2003.
B) Real GDP in 2003 will be lower than real GDP was in 1998.
C) Real GDP in 1998 will be higher than real GDP in 2003.
D) GDP will be lower in 2003 than it was in 1998.
Real GDP
The value of all finished goods and services produced within a country's borders in a specific time period, adjusted for inflation.
GDP
Gross Domestic Product, the total monetary value of all goods and services produced within a country's borders in a specific time period.
- Comprehend the importance of the GDP deflator and its function in differentiating nominal from real GDP.
Verified Answer
JA
Jessica AvilaJul 24, 2024
Final Answer :
A
Explanation :
When prices rise more quickly than output, nominal GDP (simply referred to as GDP here) increases due to the higher prices, while real GDP, which is adjusted for inflation and reflects the actual volume of production, may not increase as much. Therefore, GDP will be higher than real GDP in 2003 because it reflects the price increases not accounted for in real GDP.
Learning Objectives
- Comprehend the importance of the GDP deflator and its function in differentiating nominal from real GDP.