No Bull Economics Lessons

Macroeconomics & Microeconomics Concepts You Must Know

Macroeconomic Performance (9 of 10)

Question 9:
Real GDP yields a better reading of the economy's overall health than nominal GDP because Real GDP:

I. does not include disposable income and transfer payments.
II. accounts for changes in price level.
III. includes capital goods and consumer goods.
IV. is measured in current prices.

A.  I and III
B.  II only
C.  I and IV
D.  IV only
E.  I and II

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Correct Answer: B, II. Real GDP measures overall output to determine if production has increased over time. Nominal GDP includes inflation; if nominal GDP rises, output may not because only prices could have increased.