Question

What factor is included in real GDP but not in nominal GDP?

a) The prices used in their calculations.
b) Depreciation of capital.
c) Net exports of goods and services.
d) Indirect taxes used in their calculations.

Answer 1

Real GDP includes the use of constant prices from a chosen base year, adjusting for price level changes (inflation), which is not the case for nominal GDP calculated using current prices. The correct option is c) Net exports of goods and services.

Step-by-step explanation:

The factor included in real GDP but not in nominal GDP is the prices used in their calculations. Real GDP is calculated using the prices from a base year, thereby adjusting for inflation, while nominal GDP is measured using current prices without adjusting for changes in price levels.

Looking at specific components of GDP:

• The cost of hospital stays: Included in GDP.
• The rise in life expectancy over time: Not included in GDP (non-market transaction).
• Child care provided by a licensed daycare center: Included in GDP.
• Child care provided by a grandmother: Not included in GDP (non-market household production).
• A used car sale: Not included in GDP (used goods).
• A new car sale: Included in GDP.
• The greater variety of cheese available in supermarkets: Not directly included; however, the sales of cheese would be included.
• The iron that goes into the steel that goes into a refrigerator bought by a consumer is included as part of the refrigerator's final sale in GDP. The correct option is c) Net exports of goods and services.