The Drawback to Calculating Real GDP Using Base-Year Prices Is

question 101

Multiple Choice

The drawback to calculating real GDP using base-year prices is that

• A)real GDP in one year is not comparable to real GDP in another year.
• B)relative prices change over time and these are not reflected in base-year prices,and this distorts GDP.
• C)relative prices change over time and these changes are reflected in base-year prices.
• D)quality changes are reflected in base-year prices.

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Definitions:

Differentiated Goods

Products that are distinguished from others on the basis of quality, brand, design, or some other characteristic, making them unique from competitors’ offerings.

Product Standardization

The process of adopting uniform characteristics for a product or its components, often to ensure consistency and compatibility.

Peak Efficiency

The state or condition in which a system or process operates at its maximum potential or effectiveness, utilizing resources optimally without waste.

Monopolistic Competitor

A market structure where many companies sell products that are similar but not identical, allowing for significant control over pricing and competition on factors other than price, such as quality and branding.