Asked by Justin alvarado on May 05, 2024
Verified
Statement I: When there is inflation,real GDP will be greater than GDP.
Statement II: The greater depreciation is,the greater the difference between GDP and NDP.
A) Statement I is true and statement II is false.
B) Statement II is true and statement I is false.
C) Both statements are true.
D) Both statements are false.
Real GDP
Gross Domestic Product adjusted for inflation, representing the value of all goods and services produced over a specific time period at constant prices.
Depreciation
The gradual reduction in the economic value of the physical assets of a company due to wear and tear over time, or the loss in value of a currency.
NDP
Net Domestic Product; it calculates the total value of all goods and services produced within a country in a specific period minus depreciation.
- Understand the basic components and calculations involved in determining GDP.
- Comprehend the concept of national income and how it relates to GDP.
Verified Answer
PG
Patrick GrasseyMay 11, 2024
Final Answer :
B
Explanation :
Statement I is false because inflation affects nominal GDP and not real GDP; real GDP is adjusted for inflation, so it reflects the volume of production, not the changes in price levels. Statement II is true because NDP (Net Domestic Product) is calculated by subtracting depreciation from GDP, so a higher depreciation would indeed increase the difference between GDP and NDP.
Learning Objectives
- Understand the basic components and calculations involved in determining GDP.
- Comprehend the concept of national income and how it relates to GDP.