Chapter 11, Problem 1MCQ

To determine

The question requires us to determine the true option for real GDP.

Explanation of Solution

Real GDP is the value of GDP calculated at the base year prices. It is the inflation-adjusted value of all final goods and services in a given year in an economy.

The nominal GDP is calculated by using the current year's prices as it doesn’t adjust for inflation.

Thus, option “a” is correct.

The other options are incorrect because:

b) Generally, the value of real GDP is lower than the value of nominal GDP. In some cases, it is higher or equal to the nominal GDP.

c) An increase in the aggregate output is an indication of higher real GDP in an economy.

d) The real GDP is calculated by dividing the aggregate output by the current price.