When we try to measure real GDP and the price level,if we underestimate the growth in real GDP,we will
A) always underestimate the rate of inflation.
B) sometimes underestimate the rate of inflation.
C) always overestimate the rate of inflation.
D) sometimes overestimate the rate of inflation.
E) not be able to measure the rate of inflation.

Question

Quizplus · Accepted Answer

If real GDP growth is underestimated, it implies that the economy is producing more than what is being measured. This would lead to an overestimation of the price level increase, hence overestimating the rate of inflation.

When We Try to Measure Real GDP and the Price