Final answer:
The real GDP growth rate of 3% means that the value of all goods and services produced in a country, adjusted for inflation, has increased by 3%, reflecting overall economic expansion. This growth is in the total output, not necessarily per person.
Step-by-step explanation:
A real GDP growth rate of 3% means that the value of all goods and services produced in a country, adjusted for inflation, is increasing by 3%. It indicates that the economy is expanding, and the total output is rising. This growth rate is crucial because economic growth ultimately determines the standard of living in a country. For instance, if an economy starts with a GDP of 100 euros and grows at 3% per year, it will reach a GDP of 209 euros after 25 years, signifying a substantial increase in the economy's output. However, the growth rate itself does not specify whether the growth is in GDP per capita (output per person) or overall GDP. Thus, the correct answer to the student's question is d) The value of output is rising by 3%.
Economists view a growth rate of more than 3% as good because it suggests that the economy is healthy and growing at a significant pace. To elaborate on the concept, if an economy has a GDP per capita of 12,000 euros and it grows at an annual rate of 3% for 10 years, the GDP per capita at the end of the period would be higher, reflecting increased productivity and possibly a higher standard of living.