Why is it important to use real rather than nominal GDP figures when making comparisons of output across time periods?
A) The real GDP figures are a better measure of changes in the general level of prices.
B) The real figures will reflect changes in the quantity of output and not changes in the general level of prices.
C) The real figures will reflect changes in the general level of prices as well as changes in the quantity of output.
D) The real GDP figures adjust for changes in the level of employment.

Question

Quizplus · Accepted Answer

Nominal GDP figures include the effects of inflation, whereas real GDP figures adjust for changes in the general level of prices, allowing for a comparison of output across time periods independent of changes in the price level. Real GDP figures also adjust for changes in the quantity of output, making them a more accurate measure of economic growth. However, real GDP figures do not directly reflect changes in the level of employment.

Why Is It Important to Use Real Rather Than Nominal