If Nominal GDP Grows by 3% and the GDP Deflator

question 184

True/False

If nominal GDP grows by 3% and the GDP deflator grows by 2%,then real GDP must grow by 5%.

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Definitions:

EBIT

Earnings Before Interest and Taxes; a measure of a firm's profitability that includes all expenses except interest and income tax expenses.

Unlevered Firm

A company that operates without any debt financing, relying solely on equity for its financing needs.

Levered

Pertaining to the use of borrowed capital or debt to increase the potential return of an investment.

Break-Even EBIT

The level of Earnings Before Interest and Taxes that a company needs to achieve in order to cover all of its operating expenses without making a profit or loss.