Case Interview Prep

Category - Economics

In a given economic system, the difference between real GDP and nominal GDP is:
  1. opportunity costs
  2. mixed income
  3. production
  4. inflation
Explanation
Answer: D - Inflation is the difference between real GDP and nominal GDP.

Key Takeaway: Real GDP in a country is calculated using constant figures such as government spending using fixed figures while nominal GDP is calculated using current market values. For example, construction costs for 2010 are calculated using current raw materials’ costs which factor in inflation from the previous year. Therefore, inflation is the difference between real GDP and nominal GDP.
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