MacroEconomics 8.5 Distinguishing Between Nominal and Real Values
The problem with using foreign exchange rates to convert one country's GDP into dollars is that
not all goods and services are sold on world markets.
If nominal GDP increases, it is possible that
A. output has increased. B. both prices and output have increased. C. prices have increased. *D. any of the above might have happened.
What is the difference between nominal GDP and real GDP?
Nominal GDP is measured in current market prices while real GDP corrects for changes in the overall level of prices from year to year.
When comparing per capita GDP across countries, GDP should be adjusted for
Purchasing power parity.
The adjustment in exchange rate conversions that takes into account differences in the true cost of living across countries is known as purchasing power parity.
True
The difference between real GDP and nominal GDP for the same year reflects the amount of inflation that occurred during that year.
True
Real GDP is computed by adjusting nominal GDP for
changes in the price level.
Per capita real GDP measures the amount of real GDP
per person.
The adjustment in exchange rate conversions that takes into account differences in the true cost of living across countries is called
purchasing power parity
When GDP is corrected to reflect constant dollars, this price-corrected GDP is called
real GDP
Per capita real GDP equals The country with the highest per capita GDP based on purchasing power parity (U.S. dollars) is
real GDP/population. The United States
If real GDP increases in any year, we know that
the output of goods and services produced this year has increased.