____________is an inflation-adjusted measure that reflects the value o...
Real GDP is an inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year (expressed in base-year prices) and are often referred to as "constant-price," "inflation-corrected" GDP.
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____________is an inflation-adjusted measure that reflects the value o...
Explanation:
Gross Domestic Product (GDP) is a measure of the economic performance of a country. It is the total value of all goods and services produced within the country's borders during a given period. However, since the prices of goods and services change over time, it is necessary to adjust the GDP for inflation to get a more accurate measure of economic growth.
GDP at constant prices is an inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year and expressed in base-year prices. In other words, it measures the actual value of goods and services produced, without the distortion of changes in prices.
Example:
Suppose that in the year 2020, the GDP of a country was $100 billion at current prices. If the inflation rate between 2020 and 2021 was 5%, the GDP at current prices for 2021 would be $105 billion (assuming no change in the quantity of goods and services produced). However, this does not necessarily mean that the country's economy grew by 5%. To get a more accurate measure of economic growth, we need to adjust the GDP for inflation.
Suppose that the base year for the calculation of constant-price GDP is 2020. We can calculate the GDP at constant prices for 2020 as $100 billion (since it is the same as the GDP at current prices). We can then calculate the GDP at constant prices for 2021 using the inflation rate of 5%. The GDP at constant prices for 2021 would be $110.25 billion (i.e., $105 billion adjusted for inflation).
Conclusion:
Therefore, GDP at constant prices is a more accurate measure of economic growth than GDP at current prices, as it reflects changes in the actual quantity of goods and services produced, rather than changes in prices.