Why Do Economists Prefer to Compare Real GDP Figures for Various

question 99

Multiple Choice

Why do economists prefer to compare Real GDP figures for various years instead of GDP figures?

• A) Because when GDP in one year is higher than in another year,there is no way to tell why it is higher.Is it because output is higher,prices are higher,etc.? This is not the case with Real GDP.If Real GDP is higher in one year than in another year,it is because output is higher.
• B) Because when GDP in one year is higher than in another year,there is no way of knowing if the quality of goods produced is higher in one year than the other.This is not the case with Real GDP.If Real GDP is higher in one year than in another year,it is because the quality of the goods produced is higher.
• C) Actually the question is incorrect.Economists prefer to compare GDP figures instead of Real GDP figures.
• D) Because Real GDP is easier to compute than GDP.
• E) Because when GDP in one year is higher than in another year,there is no way to tell if the quality of life is higher in one year than the other.This is not the case with Real GDP.If Real GDP is higher in one year than in another year,it is because the quality of life is higher.

---

Definitions:

ABC

An acronym for Activity-Based Costing, a method of accounting that identifies and assigns costs to activities and then to products or services based on their use of those activities.

Product Costing System

A framework used to determine the expense associated with producing a product, taking into account all direct and indirect costs.

Indications

Suggestions or signals that point towards a specific condition, trend, or action.

Behavioral Implications

The impact that business strategies and practices have on the behavior and motivation of individuals within an organization.