A nation's real national income in a given year measures the
A)current-dollar national income earned in the economy.
B)value of output produced by the economy,measured in constant dollars.
C)level of national income that is subject to taxation by the federal government.
D)market value of national output produced by the economy.
E)opportunity cost of the economy's national output.

Question

Quizplus · Accepted Answer

Real national income measures the value of output produced by the economy, adjusted for inflation or changes in prices over time. It is usually measured in constant dollars, which allows for a more accurate comparison of national income over time. Current-dollar national income (A) does not account for inflation, and is therefore less accurate. The level of national income subject to taxation by the federal government (C) varies based on tax policies and regulations, and provides no indication of the actual value of national output. The market value of national output (D) is a valid measure of national income, but does not account for changes in prices over time. Opportunity cost (E) is not relevant to measuring national income.

A Nation's Real National Income in a Given Year Measures