Economists prefer using real GDP because, other things held constant, increases in _____ represent true increases in the standard of living.
A) production
B) prices
C) trade balances
D) consumer spending

Question

Quizplus · Accepted Answer

Real GDP measures the value of goods and services produced in an economy adjusted for inflation. By using real GDP, economists can accurately determine changes in production levels without the distortions caused by changes in prices. Higher production levels generally indicate an increase in the standard of living, as there are more goods and services available for consumption. Increases in prices (B), trade balances (C), or consumer spending (D) may not necessarily represent real increases in the standard of living, as they could be influenced by external factors such as inflation or changes in exchange rates.

Economists Prefer Using Real GDP Because, Other Things Held Constant