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.