If GDP in year 1 is the same dollar amount as the GDP in year 2,does it follow that Real GDP in year 1 is the same as Real GDP in year 2?
A) Yes,since prices must necessarily be the same in the two years.
B) No,since equal GDP figures do not account for population.
C) No,since prices may not be the same in the two years.
D) Yes,since equal GDP figures do account for a change in the quality of goods produced in the two years.
E) none of the above

Question

Quizplus · Accepted Answer

Real GDP adjusts for changes in prices between years, so if prices are not the same in both years, Real GDP will not be the same even if nominal GDP is. Therefore, the correct answer is C, since prices may not be the same in the two years. A is incorrect because prices may not be the same in the two years. B is incorrect because even if population remains the same, Real GDP could still be different due to changes in prices. D is incorrect because changes in the quality of goods produced would be accounted for in Real GDP, but this does not necessarily mean that Real GDP would be the same in both years if nominal GDP is the same.

If GDP in Year 1 Is the Same Dollar Amount