Assume an economy is producing only one product. Year 2 is the base year. Output and price data for a five-year period are given.

-Refer to the above data. If year 2 is the base year, then for the years shown, the growth of:

Question

Assume an economy is producing only one product. Year 2 is the base year. Output and price data for a five-year period are given.
 
-Refer to the above data. If year 2 is the base year, then for the years shown, the growth of:

Quizplus · Accepted Answer

When year 2 is the base year, nominal GDP includes both price and output changes, while real GDP is adjusted for inflation. If nominal GDP overstates increases in real output, it means that price increases (inflation) are contributing to the rise in nominal GDP, not just increases in real output.

Assume an Economy Is Producing Only One Product