Asked by Samuel Flores on May 05, 2024
Verified
The fact that GDP has risen faster than real GDP
A) suggests that the base year of the GDP deflator has been shifted.
B) tells us nothing about what has happened to the price level.
C) suggests that the general price level has fallen.
D) suggests that the general price level has risen.
Real GDP
Real Gross Domestic Product, indicating the total value of all produced goods and services in an economy for a year, adjusted to account for inflation, thereby showing true economic value.
Price Level
Calculating the average price across every good and service in the economy's production.
GDP Deflator
A measure of the level of prices of all new, domestically produced, final goods and services in an economy in a year, used to deflate or adjust GDP for inflation.
- Point out the dissimilarities between nominal and real GDP, along with a detailed explanation of inflation and deflation.
- Understand how inflation and deflation impact GDP and real GDP.
Verified Answer
AJ
Alexander JulianMay 09, 2024
Final Answer :
D
Explanation :
When GDP rises faster than real GDP, it indicates that the nominal GDP (which includes changes in prices) has increased more rapidly than real GDP (which is adjusted for inflation and reflects only changes in quantity). This suggests that the general price level has risen, as the difference between the growth rates of GDP and real GDP is due to changes in prices.
Learning Objectives
- Point out the dissimilarities between nominal and real GDP, along with a detailed explanation of inflation and deflation.
- Understand how inflation and deflation impact GDP and real GDP.