The drawback to calculating real GDP using base year prices is that: a. quality changes are reflected in base year prices. b. relative prices change over time and these are not reflected in base year prices, which distorts GDP. c. relative prices change over time and these changes are reflected in base year prices. d. real GDP in one year is not comparable to real GDP in another year.

What is the main problem arising from the use of base year prices to measure real GDP? a. Over​ time, prices of some goods and services change relative to prices of other goods and services. b. Real GDP is calculated with the assumption that the purchasing power of a dollar increases from one year to the next. c. When real GDP increases from year to​ year, the increase is due partly to changes in prices and partly to changes in quantities. d. Real GDP is a measure of the value of production rather than the volume of production.

Real GDP is the yearly production of final goods and services valued atGroup of answer choicescurrent prices.constant prices.expected future prices.the ratio of current prices to constant prices.

Nominal GDP ismultiple choiceadjusted for inflation, whereas real GDP is market or money value of all final goods and services produced by the economy in a given year.the market or money value of all final goods and services produced by the economy in a given year, whereas real GDP is adjusted for inflation.the sum of intermediate and final goods and services, whereas real GDP is only the sum of final goods and services.determined in the market, whereas real GDP is computed by a government agency.

If the price level increases, but the level of output remains the same from one year to the next,:Multiple choice question.real GDP will increase, but nominal GDP will remain the same.both nominal and real GDP will remain the same.nominal GDP will increase, but real GDP will remain the same.both nominal and real GDP will increase.

Consider the hypothetical information in the following table for potential GDP, real GDP and the price level in 2013 and in 2014 if the government does not use fiscal policy. Year Potential GDP Real GDP Price Level 2013 $1.5 trillion $1.5 trillion 150 2014 $1.7 trillion $1.6 trillion 152 If the government wants to use fiscal policy to keep real GDP at its potential level in 2014, it should: increase interest rates. decrease transfer payments. decrease interest rates. decrease government purchases. decrease income taxes.