Asked by Amanda Schneck on Jun 25, 2024
Verified
Which statement is true?
A) Real GDP can never increase faster than GDP.
B) Real GDP can increase faster than GDP if there is inflation.
C) Real GDP can increase faster than GDP if there is deflation.
D) None of the statements are true.
Real GDP
Gross Domestic Product after adjustments for inflation; measures the value of all goods and services produced within a country's borders in a specific time period using constant prices.
Deflation
A decrease in the general price level of goods and services, often leading to an increase in the real value of money.
Inflation
The progression at which the price level for goods and services at large advances, lessening the potency of purchasing.
- Discriminate among nominal and real GDP, recognizing also the economic conditions of inflation and deflation.
- Understand the consequences of inflation and deflation on Gross Domestic Product and real Gross Domestic Product.
Verified Answer
SC
Sir'Quora CarrollJun 26, 2024
Final Answer :
C
Explanation :
Real GDP adjusts for inflation and deflation, allowing for a more accurate comparison over time. If there is deflation, nominal GDP (often just referred to as GDP) might decrease or increase more slowly, while real GDP, which accounts for price changes, can show an increase in the economy's output faster than nominal GDP reflects.
Learning Objectives
- Discriminate among nominal and real GDP, recognizing also the economic conditions of inflation and deflation.
- Understand the consequences of inflation and deflation on Gross Domestic Product and real Gross Domestic Product.