Question

Consider the GDP price index and the​ CPI, and then choose the correct answer. A. The GDP price index weights each item using information from past expenditure surveys. B. The GDP price index is not an alternative to the CPI as a measure of the cost of living. C. If nominal GDP rises but real GDP remains​ unchanged, it must be that production has increased. D. The CPI and the GDP price index give us the same value.

Answer 1

The correct answer is letter "C": If nominal GDP rises but real GDP remains​ unchanged, it must be that production has increased.

Step-by-step explanation:

The Gross Domestic Product (GDP) is a calculation of the overall economic production of a country's goods and services. In general, GDP is measured annually within one year. Real GDP is equal to the economic output adjusted for the effects of inflation. Nominal GDP equals economic output without the inflation adjustment. Nominal GDP is usually higher than real GDP because inflation is typically a positive number.

Thus, nominal GDP can increase without increasing the real GDP.

Answer 2

C. If nominal GDP rises but real GDP remains​ unchanged, it must be that production has increased.

Explanation:

The CPI and the GDP price index and implicit price deflator are alternative measures of inflation in the U.S. economy. The choice of which one to use in a given scenario likely depends on the set of goods and services in which one is interested as a measure of price change. The CPI measures price change from the perspective of an urban consumer and thus pertains to goods and services purchased out of pocket by urban consumers. The GDP price index and implicit price deflator measure price change from the perspective of domestic production of goods and services and thus pertain to goods and services purchased by consumers, businesses, government, and foreigners, but not importers. In addition, the formulas used to calculate these two measures differ.