1. Economists define economic growth as a. an increase in nominal GDP combined w
ID: 1105042 • Letter: 1
Question
1. Economists define economic growth as
a. an increase in nominal GDP combined with price stability.
b. the process through which the economy’s potential output is increased.
c. an increase in the standard of living of a nation
2. Using actual values of real GDP to measure economic growth
a. is the most widely accepted method of measuring economic growth.
b. is superior to using actual values of nominal GDP because it allows us to isolate the effects of price changes
c. yields misleading results because changes in real GDP are affected by cyclical changes that do not represent economic growth.
Explanation / Answer
First question is answered below
Correct option: a. an increase in nominal GDP combined with price stability.
Reason: Economic growth refers to the increase in output produced in one economy compared to output produced in previous periods. This is usually represented in real terms, or nominal terms with stable prices, implying growth in real GDP
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