Real GDP Was $4,719 Billion in Year 1 and $4,848

question 93

Multiple Choice

Real GDP was $4,719 billion in Year 1 and $4,848 billion in Year 2.In contrast, real GDP per capita in Year 1 was $19,261, but in Year 2 it was only $19,162.Why did one measure increase while the other measure decreased?

• A)Real GDP indicates the level of industrial production and provides a measure of the economic strength of the nation; it is the only valid measure of economic growth.
• B)Inflation occurred during this period; therefore the two measures are not comparable.
• C)Population increased during this time period so real GDP per capita data reflect this change.
• D)Real GDP per capita measures changes in labour productivity that are not captured by a simple measure like real GDP.

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Definitions:

Firm-Commitment Basis

An underwriting process where the underwriter buys the entire issue of securities from the issuer and sells them to investors, assuming full financial risk.

Underwriter

A person or entity that assesses and accepts the risk of insurance or issue of securities, setting terms for coverage or offering prices for shares.

IPO

An Initial Public Offering is the process by which a private company becomes publicly traded on a stock exchange by offering its stock for the first time to the general public.

Green Shoe Provision

An option in an IPO that allows underwriters to buy up to an additional 15% of company shares at the offering price to manage demand and stabilize the stock price after the IPO.