PRC-3 · Chapter 13 · Question 24 of 50
A government boasts that GDP grew by 15% this year. However, inflation was also 15%. To evaluate if actual physical production increased, economists remove the illusion of inflation by calculating the:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Real GDP
Explanation
Real GDP adjusts the nominal GDP figure by using constant base-year prices, thereby stripping out the effects of inflation to show true volume growth.
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