Question

Why do economists prefer real GDP to nominal GDP when measuring the size of an economy?...

Why do economists prefer real GDP to nominal GDP when measuring the size of an economy? Question 8 options: When an economy experiences inflation, its nominal GDP tends to overvalue an actual change in the quantity of goods and serviced produced. Real GDP rises for two reasons: an increase in output and an increase in prices. When an economy experiences inflation, its real GDP is greater than its nominal GDP. Nominal GDP is GDP adjusted for inflation.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer : The answer is option A : "When an economy experiences inflation, its nominal GDP tends to overvalue an actual change in the quantity of goods and serviced produced".

With inflation the nominal GDP become overvalued on actual changes of produced quantity of goods and services. But real GDP adjust for inflation. Real GDP only change if quantity level change because real GDP is measured based on base year price level. Hence with inflation the value of nominal GDP is higher than the value of real GDP. For this reason except option A other options are not correct. Therefore, option A is the correct answer.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
5. Real versus nominal GDP Consider a simple economy that produces two goods: pens and erasers....
5. Real versus nominal GDP Consider a simple economy that produces two goods: pens and erasers. The following table shows the prices and quantities of the goods over a three-year period. Year Pens Erasers Price Quantity Price Quantity (Dollars per pen) (Number of pens) (Dollars per eraser) (Number of erasers) 2018 1 150 2 160 2019 2 135 4 230 2020 3 110 4 165 Use the information from the preceding table to fill in the following table. Year Nominal...
1. When studying changes in the economy over time, economists want a measure of the total...
1. When studying changes in the economy over time, economists want a measure of the total quantity of goods and services the economy is producing that is not affected by changes in the prices of those goods and services. In other words, economists want to study a. the GDP deflator. b. nominal GDP. c. GNP. d. real GDP. 2. Macroeconomists find core measures of inflation informative because they give information about all prices in the economy they give information about...
Which of the following could cause nominal GDP to increase and real GDP to decrease? C....
Which of the following could cause nominal GDP to increase and real GDP to decrease? C. The price level rises and the quantity of final goods and serverces produced falls Explain
Real versus nominal GDP Consider a simple economy that produces two goods: cupcakes and muffins. The...
Real versus nominal GDP Consider a simple economy that produces two goods: cupcakes and muffins. The following table shows the prices and quantities of the goods over a three-year period. Year Cupcakes Muffins Price Quantity Price Quantity (Dollars per cupcake) (Number of cupcakes) (Dollars per muffin) (Number of muffins) 2012 1 120 1 195 2013 2 130 4 195 2014 4 130 4 145 Use the information from the preceding table to fill in the following table. Year Nominal GDP...
Suppose an economy produces two goods: Apple and Banana. Calculate Nominal GDP and Real GDP by...
Suppose an economy produces two goods: Apple and Banana. Calculate Nominal GDP and Real GDP by taking 2015 as a base year. Prices and Quantities Year Price of Apple Quantity of Apple Price of Banana Quantity of Banana 2015 $2 100 $3 50 2016 $3 150 $4 100 2017 $4 200 $5 150
5- If an economy is in short-run equilibrium where the level of real GDP is less...
5- If an economy is in short-run equilibrium where the level of real GDP is less than potential output, then, in the long run, one will find: A-Nominal wages will rise and the SRAS curve will shift left bringing the economy back to its potential real GDP. B-Nominal wages will rise shifting the AD curve to the right and restoring real GDP to its potential level C-Nominal wages will fall and the SRAS curve will shift right bringing the economy...
1)    Explain what is the difference between real and nominal GDP? 2 ) and explain why do...
1)    Explain what is the difference between real and nominal GDP? 2 ) and explain why do economists need to make this distinction? 3)   Is the CPI a biased measure of the inflation rate? Explain your answer.
When an economy operates at its long-run potential output level, a. aggregate demand will exceed aggregate...
When an economy operates at its long-run potential output level, a. aggregate demand will exceed aggregate supply in the goods and services market. b. unemployment will decline to an abnormally low rate that cannot be sustained in the long run. c. the actual rate of unemployment will exceed the natural rate of unemployment. d. the natural and actual rates of unemployment will be equal. If an economy is operating in the range where its aggregate supply curve is vertical, a....
1.         Growth rate of nominal GDP – Inflation rate   = a.         price level. b.         the growth...
1.         Growth rate of nominal GDP – Inflation rate   = a.         price level. b.         the growth rate of nominal GDP. c.         the growth rate of real GDP. d.         the growth rate of long-run trend GDP. e.         how much the economy contracts during a recession. 2.         The consumption category does not include purchases a.         of new cars made by consumers. b.         of entertainment services made by consumers. c.         of new clothing made by consumers. d.         of new houses made by consumers....
5. Real versus nominal GDP Consider a simple economy that produces two goods: cupcakes and muffins....
5. Real versus nominal GDP Consider a simple economy that produces two goods: cupcakes and muffins. The following table shows the prices and quantities of the goods over a three-year period. Year Cupcakes Muffins Price Quantity Price Quantity (Dollars per cupcake) (Number of cupcakes) (Dollars per muffin) (Number of muffins) 2018 1 150 2 160 2019 2 135 4 230 2020 3 110 4 165 Use the information from the preceding table to fill in the following table. Year Nominal...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT