alleryStart learning →What is real gross domestic product?
AOutput measured at the prices that ruled in the current year
BOutput of goods only, with all services taken out of the total
COutput of the private sector, with government output removed
DOutput measured after an adjustment has been made for inflation
Answer & Solution
Correct answer: D. Output measured after an adjustment has been made for inflation
1. Gross domestic product is measured in money, so rising prices alone can make it look larger.
2. Real gross domestic product is that figure adjusted for inflation.
3. Its rate of growth matters because it shows the change in output rather than the change in prices.
4. Measuring at current-year prices leaves the inflation in, which is exactly what the adjustment removes.
5. Services are included in the measure, and so is the output of government, so neither exclusion defines it.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 1 "Understanding Economic Systems and Business", section 1.4 Macroeconomics: The Big Picture_
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