What is the main purpose of measuring real GDP instead of nominal GDP?
Correct answer: A. To remove the effect of price changes
- A. To remove the effect of price changes
- B. To include foreign production by residents
- C. To measure only government production
- D. To exclude investment in new capital
Explanation
Real GDP values output using prices from a base period, so changes more closely reflect changes in production. Nominal GDP can rise merely because prices have increased.
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About Macroeconomics
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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