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26 March, 12:56

When computing economic growth, changes in nominal gross domestic product (GDP) must be adjusted to reflect changes in the price level because:

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  1. 26 March, 13:14
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    GDP must be comparable for different years in order to determine economic growth.

    Explanation:

    When computing economic growth, changes in nominal gross domestic product (GDP) must be adjusted to reflect changes in the price level because GDP must be comparable for different years in order to determine economic growth.

    When comparing GDP from two different years, the result could give a deceptive impression because changes in prices between the two years have not been adjusted for by the use of the GDP price deflator.

    GDP deflator is used to quantify price changes when comparing nominal to real GDP for different periods.
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