Question

Suppose U. S. nominal GDP increases from one year to the next year. Can you conclude that these figures present a misleading measure of economic growth? What alternative method would provide a more accurate measure of the rate of growth?

Answer 1

There are two types of GDP calculated Nominal and Real GDP. Th nominal GDP is calculated without adjusting to the inflation rate in the economy. The real GDP is calculated adjusting to inflation rate GDP.

The nominal GDP is not the real picture of the economy and it is real GDP provides the picture of the economy because it adjusted to the inflation rate in the economy. value of the goods and service is shown considering the price movement in the economy.

Thus, the projecting the future of the economy is based on nominal GDP is not good idea.