Question

If prices rise over​ time, then real GDP will be A. smaller than nominal GDP in years before the base year. B. larger than nominal GDP in years before the base year. C. smaller than nominal GDP in the base year. D. larger than nominal GDP in years after the base year.

Answer 1

Answer: B

Explanation:If prices rise over​ time, then real GDP will be larger than nominal GDP in years before the base year. Real gross domestic product is a macroeconomic assessment that measures the value of the goods and services produced by an economic entity in a specific period, adjusted for inflation. GDP is derived by valuing all production by an economy using a specific year's average prices. Governments use GDP as a comparison tool to analyze an economy's purchasing power and growth over time. This is done by looking at the economic output of two periods and valuing each period with the same average prices and comparing the two together.On the other hand ,Nominal GDP is a macroeconomic assessment that includes current prices in its measure. The main difference between nominal GDP and real GDP is the adjustment for prices from year to year. Since nominal GDP is calculated using prices in that year and does not account for inflation, it can make comparisons from one year to another less useful. Nominal GDP is a macroeconomic assessment that includes current prices in its measure. The main difference between nominal GDP and real GDP is the adjustment for prices from year to year. Since nominal GDP is calculated using prices in that year and does not account for inflation, it can make comparisons from one year to another less useful.