Kara McLeod
Macroeconomics Exam 1
Section 11
Short Essay Questions
1) Question H: Define and distinguish between real and nominal GDP. Explain why the
distinction is important to economists.
a) GDP or gross domestic product is defined as “ the total market value of all fina;
goods and final services produced annually within the boundaries of a nation.”
There are two main versions of GDP, nominal GDP, and real GDP. The main
difference between the two is that real GDP accounts for inflation, whereas
nominal GDP does not. This is an important distinction to economists because
inflation can change the overall data, whereas if inflation is taken into account, a
control is created thus producing more reliable data.
2) Question R: Explain the ways in which the government can persuade private businesses
to invest more in order to speed up the process of capital formation?
a) One main way in which the government can persuade private businesses to invest
