If nominal GDP increases by 7 percent while the GDP price index increases by 4 percent, real GDP increases by approximately
Correct answer: A. 3 percent
- A. 3 percent
- B. 4 percent
- C. 7 percent
- D. 11 percent
Explanation
Real GDP growth is approximately nominal GDP growth minus the increase in the general price level. Thus, 7 percent minus 4 percent gives an approximate real growth rate of 3 percent. The exact calculation gives a result close to, but slightly below, 3 percent.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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