The correct statement representing the relationship between nominal GDP and real GDP is: Nominal GDP measures current production using base-year prices while real GDP measures current production using current prices.
Nominal GDP is the total value of goods and services produced in a given year which is measured using the prices of that year's base year.
Real GDP adjusts for inflation by measuring the total value of goods and services produced in a given year using the prices of the current year which provides a more accurate reflection of the actual production output.
Therefore, the chosen Option B is the one that accurately describes the distinction between nominal and real GDP because its highlights their respective price bases for measurement.
Full question:
Which statement correctly represents the relationship between nominal GDP and real GDP?
a. Nominal GDP measures base-year production using base-year prices, while real GDP measures current production using current prices.
b. Nominal GDP measures current production using base-year prices, while real GDP measures current production using current prices.
c. Nominal GDP measures current production using current prices, while real GDP measures current production using base-year prices.
d. Nominal GDP measures current production using current prices, while real GDP measures base-year production using base-year prices.