Question

1. in no more than five(5) lines of typed text below this question, explain why REAL...

1. in no more than five(5) lines of typed text below this question, explain why REAL GDP is used as a measure of economic growth. keep in mind the formula used to calculate REAL GDP.

2. in no more than five(5) lines of typed text below this question, explain why only the market values of FINAL or FINISHED goods and services are used in the measurement/calculation of an economy's GDP.

Homework Answers

Answer #1

1) the real GDP is the nominal GDP divided by the price level. It thus tells us the size of the basket that one will be able to purchase. The increase in real GDP tells wether the welfare of the person or the income increase because this will lead to the size of the consumer basket. Other than this the concept of Real GDP nullifies the impact ofprice level and helps us in knowing wether the increase in GDP is coming through increased production and not through increased price level.

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