Table 5-4
The table below reports nominal and real GDP for the U.S. from 1929 to 1932.

-Refer to Table 5-3. What was the growth rate of real GDP for 1931?

Question

Table 5-4
The table below reports nominal and real GDP for the U.S. from 1929 to 1932.
 
-Refer to Table 5-3. What was the growth rate of real GDP for 1931?

Quizplus · Accepted Answer

To compute the growth rate of real GDP for 1931, we need to calculate the percentage change in real GDP from 1930 to 1931. Real GDP in 1930 was $92.2 billion (from the table), and real GDP in 1931 was $86.3 billion (computed as nominal GDP in 1931 divided by the price index in 1931). The percentage change in real GDP is [(86.3-92.2)/92.2] x 100%, which is approximately -6.49%. Therefore, the correct answer is C. Both choices A and B are incorrect, as they make inaccurate statements about the relative usefulness of nominal and real GDP. Nominal GDP displays the dollar value of output within a given year, while real GDP adjusts nominal GDP for price changes, providing a better indicator of economic welfare since it accounts for inflation or deflation.

Table 5-4 the Table Below Reports Nominal and Real GDP for the for the U.S