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Inflation and Economic Data

APMACR-ELJ1E6

Why is inflation important to consider before comparing one year of production within a country to a different year of production?

A

Politicians set inflation numbers to influence the economy. Taking inflation out ensures a better comparison of what really happened.

B

Nominal GDP will be much lower if it contains inflated numbers.

C

Real GDP will be identical to nominal GDP if you don't consider inflation first.

D

If inflation is included when comparing data, it may overstate actual production that occurred.

E

Factoring inflation allows one to calculate deficit spending which will be useful for fiscal policy decisions