Real GDP Is Preferred to Nominal GDP as a Measure

question 152

Multiple Choice

Real GDP is preferred to nominal GDP as a measure of economic performance because

• A) nominal GDP uses current prices and thus may over or understate true changes in output.
• B) nominal GDP only includes goods and excludes services.
• C) nominal GDP is not adjusted for population changes.
• D) real GDP accounts for changes in the quality of goods and services produced.

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Definitions:

Mixed Numbers

Numbers consisting of an integer and a fraction, representing quantities greater than one.

Lowest Terms

Refers to a fraction simplified to its smallest possible numerator and denominator without changing its value.

Improper Fractions

Fractions where the numerator (top number) is greater than or equal to the denominator (bottom number), resulting in a value greater than or equal to one.

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