7.2 Real vs Nominal GDP

Question 1

What is Nominal GDP?

Answer 1

Measured at current prices (the prices prevailing at the time of measurement)

Nominal GDP can increase due to inflation, not necessarily due to increased production.

Question 2

What is Real GDP?

Answer 2

Adjusted for inflation using a base year

Reflects the true growth in production and economic activity.

Question 3

What is the GDP Deflator?

Answer 3

A price index used to convert nominal GDP to real GDP

It provides a measure of inflation within the economy.

Question 4

What is the formula for the GDP Deflator?

Answer 4

GDP Deflator = (Nominal GDP / Real GDP) × 100

Question 5

True or False: Nominal GDP accounts for inflation.

Answer 5

False

Question 6

True or False: Real GDP provides a more accurate measure of economic growth.

Answer 6

True

Question 7

Fill in the blank: Real GDP is adjusted for _______.

Answer 7

inflation

Question 8

Fill in the blank: The GDP Deflator helps convert _______ to Real GDP.

Answer 8

Nominal GDP