Question

The major difference between real and nominal GDP is that real GDP

Answer 1

C). Real GDP is adjusted for price level changes, whereas nominal GDP is not.

Explanation

The GDP of a country measures the total value of all final goods and services produced within that country in a certain period of time (typically a year.)

Real GDP is based on nominal GDP, but takes changes in the overall price level into account as well. That's why the two indice are so similar, except for that the value of real GDP but not nominal GDP can be compared over a period of many year to show economic growth.

• Neither real GDP nor nominal GDP measure debt, which isn't part of the output of an economy.
• Both real GDP and nominal GDP take the value of exports into account, as long as the good being sold abroad is made inside that country. Net export is also one of the four types of spendings on the output of an economy.
• Only real GDP is adjusted for changes in the price level. This point sets real and nominal GDP apart.
• Neither real GDP nor nominal GDP counts intermediate goods. To avoid counting the same good or service twice, both indice measure only the value of final goods and services.