To determine whether an economy's output is growing or shrinking, one must keep track of

Question

Quizplus · Accepted Answer

Real GDP measures the value of a country's goods and services adjusted for inflation, meaning it reflects changes in the quantity of goods and services produced rather than changes in prices. Therefore, changes in real GDP are the best indicator of whether an economy's output is growing or shrinking. Changes in nominal GDP (answer A) can be misleading because they can be influenced by changes in prices. Changes in the growth rate of nominal GDP (answer B) can provide some information but do not directly indicate whether the economy is growing or shrinking. Changes in the general price level (answer C) are important to track, but they do not necessarily determine whether the economy's output is growing or shrinking.

To Determine Whether an Economy's Output Is Growing or Shrinking