Chapter 13.2, Problem 3R

To determine

To state: The reason for real GDP will be more accurate that nominal GDP if the growth of one year is compared with other.

Explanation of Solution

The value of products and services produced in the economy before making any adjustment for inflation is nominal GDP and the value of nominal GDP from which adjustment of inflation is made, is termed as real GDP. The real GDP shows the real changes in output. The value of real GDP also considers the effect of inflation on an economy.

Hence, when growth of one year is to be compared with another, using real GDP provides more accurate result.

Economics Concept Introduction

Introduction:

Gross domestic product- The value of gross domestic product tells the amount of goods and services that are available within the borders of a country. The importance of GDP is that give information about the size of economy and the performance of economy.