Fill in the Blanks Module 11Online version Nominal GDP vs. Real GDP - Fill-in-the-Blank by Zachary Foust 1 prices size price real output GDP is a measure of the of the economy , providing a scale against which to compare the economic performance of other years . Part of the increase in the value of GDP over time represents increases in the of goods and services rather than an increase in . To measure actual changes in aggregate output , economists use a modified version of GDP that is adjusted for changes , known as GDP . 2 prices aggregate prices Real prices total output time GDP provides a good way to compare the size of different economies , but it's not a good measure of the economy's growth over . Even if an economy's output doesn't change , GDP will go up if the of the goods and services the economy produces increase . GDP can fall either because the economy is producing less or because have fallen . An accurate measure of is needed . Aggregate output is the quantity of final goods and service produced within an economy . GDP is a measure of aggregate output . By tracking real GDP over time , economists avoid the problem of changes in distorting the value of changes in production . 3 constant prices Real eliminating base prices quantities current Nominal given To estimate the true increase in aggregate output , economists have to determine how much GDP would have gone up if had not changed . To find aggregate output , economists use the from year 2 and the from year 1 . Real GDP is the total value of all final goods and services produced in the economy during a year , calculated as if prices had stayed at the level of some year . GDP removes the effect of price changes . Nominal GDP is the total value of all final goods and services produced in the economy during a year , calculated at prices . GDP can overstate or understate growth in output over time . By comparing output using a common set of prices , economists are able to focus solely on changes in the quantity of output by the influence of changes in prices . 4 limitations distributed income person population productivity average labor divided include expenditures working afford Other things equal , a country with a larger population will have a higher GDP simply because there are more people . To eliminate the effect of differences in size , economists use GDP per capita . GDP per capita is GDP by the size of the population . GDP per capita is the GDP per person . Real GDP per capita is the average real GDP per . Real GDP per capita can be a useful measure of . Real GDP per capita has well - known as a measure of a country's living standards . Real GDP does not many of the things that contribute to happiness , such as leisure time , volunteerism , housework , and natural beauty . Real GDP increases with on some things that make people unhappy , including disease , divorce , crime , and natural disasters . Real GDP per capita corresponds to the value of in a country . A country with a relatively high GDP per capita can relatively high expenditures on health and education , however , real GDP per capita does not indicate how income is .
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