Why would an economist use real GDP rather than nominal GDP to measure growth?

Real GDP calculates the GDP for a longer period of time.

Real GDP uses current prices to measure the year's output.

Nominal GDP applies to only a small number of industries.

Real GDP reflects output more accurately than nominal GDP by using constant prices.

Question

Justice Riddle

Social Studies

18 January, 11:20

Why would an economist use real GDP rather than nominal GDP to measure growth?

Real GDP calculates the GDP for a longer period of time.

Real GDP uses current prices to measure the year's output.

Nominal GDP applies to only a small number of industries.

Real GDP reflects output more accurately than nominal GDP by using constant prices.

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Answers (1)

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Monica Hayes · Answer 1

The correct answer is Real GDP reflects output more accurately than nominal GDP by using constant prices.

Gross domestic product (GDP) represents the sum (in monetary values) of all final goods and services produced in a given region (whether countries, states or cities) over a given period (month, quarter, year). GDP is one of the most widely used indicators in macroeconomics to quantify the economic activity of a region.

In the GDP count, only final goods and services are considered, excluding all intermediate consumer goods from the account. This is done to avoid the double counting problem, when values generated in the production chain are counted twice in the sum of GDP.