If GDP Grows 8% in One Year and Inflation, Measured

question 211

True/False

If GDP grows 8% in one year and inflation, measured by the GDP deflator, grows by 6% over the same time period, then real GDP has increased.

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Definitions:

Bananas

A type of edible fruit that is elongated and curved, with soft flesh rich in starch covered by a peel.

Perfect Complements

Goods that are often used together in fixed proportions, where the consumption of one item necessarily involves the consumption of the other.

Income Effect

The change in an individual's or economy's consumption patterns due to a change in real income, reflecting how increases or decreases in income can affect buying habits.

Substitution Effect

The alteration in purchasing behavior caused by variations in the relative costs of products, prompting buyers to opt for less expensive alternatives over pricier ones.