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Why Is It Necessary to Adjust Changes in Nominal Gross

question 44

Essay

Why is it necessary to adjust changes in nominal gross domestic product (GDP)for changes in prices and changes in population (i.e.,compute per capita real GDP)before using it as a measure of economic growth?


Definitions:

Investment Turnover

An indicator of how effectively an organization is using its invested capital to produce income.

Profit Margin

A financial metric that measures the amount of net income earned with each dollar of sales generated, expressed as a percentage.

Return On Investment

A performance measure used to evaluate the efficiency or profitability of an investment or to compare the efficiency of several different investments.

Residual Income

Earnings that exceed the minimum required return on a company's operating assets, demonstrating the excess of net operating income over its cost of capital.

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