Answered: uppose the u.s. nominal GDP increases…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose the u.s. nominal GDP increases from one year to the next year. Can you conclude that these figures present a misleading measure of economic growth?

Definition Definition Increase in the amount of goods and services produced by a country in a given period of time compared to an earlier period. Economic growth is generally coupled with a rise in national income or the purchasing power of individuals. It is often measured in terms of the increase in a country's gross domestic product (GDP), or the overall monetary value of all the complete or final services and goods that a country can produce within its domestic boundaries in a specific period.

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The nominal GDP is the measure of GDP which is being calculated by multiplying the current year quantity of goods and services produces with the current year price level in the economy. Thus, the nominal GDP includes the inflation in it. The real GDP on the other hand is calculated by multiplying the current year quantity with the base year price level which makes it inflation-free. This is the difference between the nominal and real GDPs of the economy.

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