Asked by Enrique Cuevas on Jul 18, 2024
Verified
When there is deflation,
A) GDP grows faster than real GDP.
B) GDP grows more slowly than real GDP.
C) GDP and real GDP grow at the same rate.
D) There is no way to compare the growth rates of GDP and real GDP.
Deflation
A drop in the average cost of goods and services, typically connected with a boost in the purchasing power of money.
Real GDP
An economic metric that measures the value of all goods and services produced by a country in a year, adjusted for inflation, reflecting the real growth.
- Recognize the criticality of the GDP deflator and inflation in economic analysis.
Verified Answer
AF
Acheampong FelixJul 21, 2024
Final Answer :
B
Explanation :
Deflation is a situation where the overall price level decreases. This means that the nominal GDP will decrease if the economy produces the same real output. Therefore, GDP will grow more slowly than real GDP.
Learning Objectives
- Recognize the criticality of the GDP deflator and inflation in economic analysis.