Answered: Why do economists prefer to use real…

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter7: Macroeconomic Measurements, Part Ii: Gdp And Real Gdp

Section7.2: The Expenditure Approach To Computing Gdp For A Real World Economy

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Why do economists prefer to use real gross domestic product (RGDP) instead of nominal gross domestic product (NGDP) when measuring the economic growth of a country? Why is real GDP considered more relevant than the other?

Definition Definition Increase in the amount of goods and services produced by a country in a given period of time compared to an earlier period. Economic growth is generally coupled with a rise in national income or the purchasing power of individuals. It is often measured in terms of the increase in a country's gross domestic product (GDP), or the overall monetary value of all the complete or final services and goods that a country can produce within its domestic boundaries in a specific period.

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The nominal GDP refers to the final goods and services produced at market price within the domestic territory of any country, using the current year prices.

The real GDP refers to the final goods and services produced within the domestic territory of any country, using the base year prices.

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