What Is the Difference Between Nominal and Real GDP

question 107

Multiple Choice

What is the difference between nominal and real GDP?

• A) Nominal GDP values production at current prices, while real GDP values production at constant prices.
• B) Nominal GDP values production at constant prices, while real GDP values production at current prices.
• C) Nominal GDP values production at market prices, while real GDP values production at the cost of the resources used in the production process.
• D) Nominal GDP consistently underestimates the value of production, while real GDP consistently overestimates the value of production.

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Definitions:

Bowed Outward

A description of a production possibility frontier that demonstrates the increasing opportunity cost of producing one good over another.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision or choosing to invest in one option over others.

Rectangles

A four-sided flat shape where every angle is a right angle and opposite sides are parallel and equal in length.

Historical Episode

A significant event or series of events in the past that has a substantial impact on the present or future.