Question

It is important to use real rather than nominal gdp figures when making comparisons of output across time periods because the real figures will reflect changes in the quantity of output and not changes in the general level of prices. True or False

Answer 1

Answer: TRUE

Explanation: Gross Domestic Product ( GDP) can be described as the market value of all goods and services produced in a country within a particular time period which is usually a year.

The equation for finding GDP is given as -

GDP = Consumption + Investment + Government Spending + ( Exports - Imports)

Nominal GDP can be described as the market value of all goods and services produced in a country within a particular time period using current market prices.

Real GDP can be described as the market value of all goods and services produced in a country within a particular time period using base year prices. Using base year prices to calculate real GDP adjusts for inflation.