Question

1. Deflation represents:

		a reduction in the aggregate price level.
		an increase in the unemployment rate.
		a recession.
		a reduction in output.

2. Real Gross Domestic Product is

		the value of total production linked back to the prices of a single year.
		the amount of people unemployed divided by the total labor force.
		the productivity of labor.
		the most that can be produced when the economy's resources are fully employed.

Answer 1

1.

The inflation means an increase in the overall price level in the economy while deflation means a decrease in the overall price level in the economy.

Hence deflation represents a reduction in the aggregate price level.

Hence option first is the correct answer.

2.

The GDP can be defined the market value of all goods and services which are produced in the domestic territory of the country in the current financial years.

GDP=C+I+G+X-M

The real GDP is price adjusted nominal GDP.

Hence it can be said that Real Gross Domestic Product is the value of total production linked back to the prices of a single year.

Hence option first is the correct answer.