Real GDP will increase only if the

Question

Quizplus · Accepted Answer

Real GDP, by definition, measures the value of goods and services produced in an economy adjusted for inflation. Therefore, the only way for real GDP to increase is if the quantity of goods and services produced increases. A rise in average level of prices (inflation) may increase nominal GDP, but real GDP will only increase if there is an increase in the quantity of goods and services produced. Changes in the unemployment rate or employment rate may reflect changes in the overall health of the economy but are not direct determinants of changes in real GDP.

Real GDP Will Increase Only If the