4.1.1 Measurement of Growth

• What is economic growth typically measured by?

  Real GDP
• What does nominal GDP reflect?

  Economic activity at current prices
• What is the primary purpose of real GDP?

  Measure growth in production
• Real GDP is calculated by adjusting nominal GDP using a price index, such as the GDP deflator
• The formula for calculating real GDP is: Real GDP = (Nominal GDP / GDP Deflator) x 100.


  True
• The GDP deflator is used to convert nominal GDP into real GDP.
• What is the key difference between nominal GDP and real GDP?

  Treatment of inflation
• Economic growth is measured by the increase in real GDP.
• If nominal GDP grows by 10% and the GDP deflator increases by 5%, real GDP grows by 4.8%.


  True
• Real GDP is calculated by adjusting nominal GDP for inflation.
• What is the formula for calculating real GDP?

  $(Nominal\ GDP\ / \ GDP\ Deflator)\ \times\ 100$
• Using the GDP deflator ensures that real GDP reflects actual growth in production
• Why is real GDP a more accurate measure of economic growth than nominal GDP?

  It removes inflationary effects
• A 10% increase in nominal GDP with a 5% increase in the GDP deflator results in a 4.8% increase in real GDP.


  True
• What does GNI include that GDP does not?

  Income earned abroad
• Nominal GDP includes inflation, while real GDP does not.

  True
• Real GDP measures the actual growth in production
• Real GDP provides a more accurate picture of economic growth than nominal GDP.


  True
• What is the GDP deflator used to measure?

  Inflation
• What is the formula to calculate real GDP?

  (Nominal GDP / GDP Deflator) x 100
• The GDP deflator ensures that real GDP reflects actual growth in production, not just price increases.


  True
• Real GDP measures the actual growth in production by removing the effects of inflation.


  True
• What does real GDP measure?

  Actual growth in production
• Match the GDP type with its characteristic:

  Nominal GDP ↔️ Includes inflation

  Real GDP ↔️ Adjusted for inflation
• Real GDP is calculated by adjusting nominal GDP for inflation using a price index, such as the GDP deflator.deflator
• Real GDP converts current prices into prices from a base year to remove the effects of inflation.


  True
• Nominal GDP includes the effects of inflation, while real GDP does not.


  True
• Real GDP adjusts the nominal GDP using a price index like the GDP deflator
• Match the measure with its purpose:

  Gross National Income (GNI) ↔️ Provides a broader picture of a country's economic resources

  GDP per capita ↔️ Indicates the average standard of living in a country
• GDP per capita is calculated by dividing GDP by the total population