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Why is real GDP more suitable than nominal GDP for comparing output across years when prices change?

Answer and explanation

Correct answer: It removes the effect of price changes

Real GDP values output at constant prices, so a change in the general price level does not by itself make measured GDP rise or fall. This makes year-to-year output comparisons more meaningful. For comparing average material living standards, real GDP per capita is more informative because it also accounts for population size.

Related tags

Real GdpLiving StandardsPrice AdjustmentGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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