Which of the following is TRUE regarding real GDP?
I. Real GDP is the value of the total production of the countryʹs farms, factories, shops, and offices.
II. Real GDP rises whenever inflation occurs.
III. Real GDP does not measure all that is produced.

Question

Quizplus · Accepted Answer

I. Real GDP is the value of the total production of the country's farms, factories, shops, and offices - This statement is true.
II. Real GDP rises whenever inflation occurs - This statement is false. Real GDP is adjusted for inflation, so it measures the value of goods and services produced in constant dollars. Therefore, the increase in nominal GDP due to inflation is removed in the calculation of real GDP.
III. Real GDP does not measure all that is produced - This statement is true. Real GDP only measures the value of final goods and services, so it does not include intermediate goods and services, DIY production, or the value of non-market goods and services.

Which of the Following Is TRUE Regarding Real GDP