Why is real GDP used when comparing living standards?
Answer and explanation
Correct answer: Because it removes the effect of price changes
Real GDP values output using constant base-year prices, so it removes the misleading effect of general price changes. This makes comparisons of production across years more meaningful. For living standards, real GDP per capita is even more appropriate because it also accounts for population size. Therefore, option A is correct; exports, taxes, and population are not the reason real GDP is price-adjusted.
Frequently asked questions
What is the correct answer to this question?
Because it removes the effect of price changes
Why is this the correct answer?
Real GDP values output using constant base-year prices, so it removes the misleading effect of general price changes. This makes comparisons of production across years more meaningful. For living standards, real GDP per capita is even more appropriate because it also accounts for population size. Therefore, option A is correct; exports, taxes, and population are not the reason real GDP is price-adjusted.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates. Topic: GDP and Welfare.
