8 min read
This study guide covers nominal GDP, real GDP, and the GDP deflator. It explains why nominal GDP is insufficient for measuring economic growth and how real GDP provides a more accurate measure by using base year prices. It includes calculations for both, along with examples. The guide also explains the GDP deflator formula, its relationship to inflation, and provides practice questions and exam tips.
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Question 1 of 9
Ready to dive in? 🚀 Which of the following is the main reason why economists prefer to use Real GDP over Nominal GDP when measuring economic growth?
Real GDP is easier to calculate
Real GDP accounts for inflation
Nominal GDP accounts for population changes
Nominal GDP uses base year prices