Question

1. Assuming the price level decreased, and real gross domestic product (GDP) is greater than nominal GDP. Is the current year before or after the base year?

2. Official GDP may understate the actual output of an economy. Give one possible reason to explain this.

Answer 1

Answer : Current year is after the base year because as real gdp taken base year price where as nominal GDP has taken current year price into an account.

Answer ' Yes the statement is right because as official GDP has only taken final goods and services into an account and no good in progress taken into an account .As goods such as car or industrial good taken long time to manufacture so it is not complete in one year so they are not taken in an output.