5. Real GDP vs Nominal GDP

Question 1

Why may a country’s GDP change over time?

Answer 1

Inflation and the change in market prices

Question 2

Why might the Nominal GDP be misleading?

Answer 2

As values are measured from the current market value, they can change over time. An increase in GDP may just mean an increase of prices and inflation, not ACTUAL economic growth

Question 3

How would you get the Real GDP from Nominal GDP?

Answer 3

Remove the inflation from the Nominal GDP and compare it against previous years’ GDP.

Question 4

What is NZ’s GDP?

Answer 4

$285.9 Billion

Question 5

What are the largest sectors of NZ’s economy?

Answer 5

Tertiary, secondary, primary

Question 6

What does all this information about GDP do?

Answer 6

Helps the government make informed decisions on economic policy as it has a better understanding of the allocation of resources within the country.

Comparison can be made on the standard of living

Question 7

What is Negative Growth?

Answer 7

The shrinking of Real output. Fewer goods and services are being produced. Common during a recession