Question

Real GDP is a more accurate measure of an economy's production than nominal GDP because:

Select one:

A. Real GDP includes the value of exports, but nominal GDP does not

B. Real GDP does not include the value of intermediate goods and services, but nominal GDP does

C. Real GDP measures the value of the goods and services an economy produces, but nominal GDP measures the value of the goods and services an economy consumes

D. Real GDP is not influenced by price changes, but nominal GDP is

Answer 1

Ans:

Option D

Real GDP is not influenced by price changes, but nominal GDP is.

Explanation

Gross domestic product(GDP) is the market value of final goods and services produced by a country during a specific period of time. Nominal GDP is GDP evaluated at current market prices.However real GDP reflects the value of final goods and services produced by a country during a specific period of time, expressed in base year prices. Hence real GDP is a more accurate measure of an economy's output than nominal GDP because nominal GDP is influenced by price changes.