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    Difference between real GDP and nominal GDP

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    1) During 2004, the national average gas price rose from $1.50 a gallon to $2.25 a gallon. The government has stated that the high price of gas was to remain as it is. Discuss how the cost influences your decision to buy a new car. Base3d on your budget, would you buy a large car that gets 7 miles per gallon or the car that gets 25 miles per gallon? please explain your reasoning.

    2) What is the difference between real GDP and nominal GDP? Does GDP accurately reflect our nation's productivity? Explain your answer please.

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    Solution Preview

    The answer to your first question would really depend on a number of factors. Whether one buys a large or a small car depends largely on their needs. If they are going to be hauling a lot of gear or people around, then it would make more sense to have a larger car. If you are going to be doing most of your driving in a large city over short distances then having a smaller car would make more sense. Most people who are cost conscious would buy the car that gets 25 miles/gallon because they ...