4) Suppose an economy’s nominal GDP increased 3 percent in 2008. Why is this information alone...
4) Suppose an economy’s nominal GDP increased 3 percent in 2008. Why is this information alone not enough
to determine whether the economy experienced economic growth? What other information would you need?
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Homework Answers
Answer : Economic growth is measured based on real GDP. The formula of economic growth rate is,
Economic growth rate = [(Real GDP of current year - Real GDP of previous year) / Real GDP of previous year] * 100
So, to determine the economic growth rate the nominal GDP is not required. Here only the growth rate of nominal GDP of 2008 is given which is not required to determine the economic growth. Here the required information is real GDP of year 2008 and the real GDP of previous year or base year.
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4) Suppose an economy’s nominal GDP
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