Which of the following statements correctly highlights a difference between real GDP and nominal GDP?
A) Real GDP includes the value of goods and services produced by foreign firms, while nominal GDP does not include the value of goods and services produced by foreign firms.
B) Real GDP includes the value of goods and services produced by domestic firms in foreign countries, while nominal GDP does not include the value of goods and services produced by domestic firms in foreign countries.
C) Real GDP strips out the effect of changing prices on the value of goods and services produced, while nominal GDP does not strip out the effect of changing prices on the value of goods and services produced.
D) Real GDP does not take into account the value of goods and services provided, while nominal GDP takes these into account.

Question

Quizplus · Accepted Answer

Real GDP adjusts for changes in prices over time through the use of a price index, while nominal GDP does not adjust for price changes. Options A and B are incorrect because both real and nominal GDP include the value of goods and services produced by domestic and foreign firms. Option D is incorrect because both real and nominal GDP take into account the value of goods and services provided.

Which of the Following Statements Correctly Highlights a Difference Between