Why Is It Important to Use Real Rather Than Nominal

question 161

Multiple Choice

Why is it important to use real rather than nominal GDP figures when making comparisons of output across time periods?

• A) The real GDP figures are a better measure of changes in the general level of prices.
• B) The real figures will reflect changes in the quantity of output and not changes in the general level of prices.
• C) The real figures will reflect changes in the general level of prices as well as changes in the quantity of output.
• D) The real GDP figures adjust for changes in the level of employment.

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Definitions:

Retroactive Interference

A phenomenon where new memories impair the retrieval of older memories.

Hindsight Bias

The tendency to believe, after an event has occurred, that one would have predicted or expected the outcome, often referred to as the "I-knew-it-all-along" phenomenon.

Proactive Interference

The phenomenon where previously learned information interferes with the recall of newer information.

Retroactive Interference

A cognitive phenomenon where newly learned information interferes with the recall of previously learned information.