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:

Accounts Payable

Liabilities or amounts owed by a company to suppliers or creditors for goods and services received but not yet paid for.

Accrued Liabilities

Expenses that have been incurred but not yet paid or recorded through a standard accounting transaction, representing future cash outflows.

Decrease Cash

Decrease cash refers to a reduction in the amount of money and cash equivalents available in a company, which can result from paying expenses, purchasing assets, or distributing dividends.

Inventory Method

An accounting approach used to value and manage the inventory a business holds, affecting cost of goods sold and ending inventory.