Question

Real GDP removes any inflation from the calculation of GDP. Why is it important to remove a general increase in prices from the calculation of GDP?

A. Including inflation into the calculation of GDP will under-estimate the GDP.
B. Including inflation into the calculation of GDP will over-estimate the GDP.
C. Not including inflation into the caluculation will over-estimate the GDP.

Answer 1

C. Not including inflation into the caluculation will over-estimate the GDP.