CSEET · Economic and Business Environment · National Income Accounting and Related Concepts
Which statement correctly distinguishes nominal GDP from real GDP?
Real GDP is nominal GDP adjusted for price changes, valuing output at constant base-year prices, so it shows changes in the volume of output only. Nominal GDP uses current prices and therefore also reflects inflation.
- ANominal GDP is measured at constant base-year prices, while real GDP is at current prices
- BReal GDP is nominal GDP adjusted for price changes, so it reflects changes in output onlyCorrect
- CReal GDP always exceeds nominal GDP in an inflationary period
- DNominal GDP excludes the value of services while real GDP includes them
Explanation
Real GDP values output at constant base-year prices, removing the effect of price changes, so changes reflect volume of output. Option A reverses the definitions. Under inflation, nominal GDP exceeds real GDP for years after the base year. Both include services.
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