Question

10 points time remaining 1 hour 55 minutes 11 seconds 01:55:11 print references item 12 item 12 10 points time remaining 1 hour 55 minutes 11 seconds 01:55:11 real gdp accounts for changes in product quality; nominal gdp does not.

Answer 1

The difference between Real and Nominal GDP falls to how inflation is considered, in turn, reflecting the true purchasing power of money. Real GDP accounts for economic inflation while Nominal GDP does not. Since inflation involves the value of money losing worth, Nominal GDP does not account for extra costs effecting manufacturers, that they are not able to afford higher quality materials, but, due to the misrepresentation of GDP by making output seem higher than what it is, the general public is led to believe that manufacturers are just "greedy." Real GDP, giving the GDP output as it really is in relation to the worth of money, shows that manufacturers have no choice but to use cheaper materials, or charge higher prices for their products. So, Real GDP reflects the quality and prices manufacturers really have to deal with and Nominal GDP misrepresents the costs facing the manufacturer, and the product decisions they have to make.