Question

1. (3 pts.) Of the following alternatives, which is the best measure of the economic satisfaction of the

members of a society:

A. Nominal GDP

B. The rate of in

C. The value of corporate prots

D. Real GDP

Answer 1

ANS : D) Real GDP

This is so because the real GDP is the inflation adjusted value of the good and services produced in a country within a year. This is a measure of the real factors of production and nominal factors such as wage rate and inflation rate do not play a role in this. The real GDP encompasses the output of the entire economy while also discounting for inflation rate.

The nominal GDP does not take inflation into account. Thus even though there may be an increase in nominal GDP, it will not necessarily mean that the economy is producing a greater amount of output and is doing better as the increase in nominal GDP can be due to the inflation in the economy.

Similarly the rate of inflation only sees the change in price levels of goods in the economy and not the actual output of the economy thus it isn't a good measure for the economic output.

The value of corporate profits only takes into account the economic satisfaction of corporates and thus does not measure the economic satisfaction of all members of society(such as the workers, farmers etc.).