Economics • Economic BasicsEasy
What does the Gross Domestic Product measure when calculated at constant prices?
A. Total monetary value of goods using current year market rates
B. Real output adjusted for inflation using a designated base year✓ Correct Answer
C. Total national income minus depreciation of capital assets
D. Net factor income earned from abroad plus domestic production
💡 Solution & Explanation
Real gross domestic product reflects the total economic output produced within a country adjusted for price changes by evaluating production using prices from a fixed base year. This isolation from inflationary fluctuations allows accurate temporal comparison of physical output growth. Nominal gross domestic product utilizes current market prices without inflation adjustment. Real gross domestic product serves as the primary benchmark for measuring genuine economic expansion and macroeconomic productivity over successive multi-year intervals.
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