Chapter 2, Problem 1QQ

To determine

The correct option.

Answer to Problem 1QQ

Option ‘b’ is the correct answer.

Explanation of Solution

Option (b):

The nominal gross domestic product measures the value of economy’s total output at present price level and is a flow variable. This nominal GDP measures the output in a particular time period. A variable that measures with the reference of time period is called flow variable. Thus, option (b) is correct.

Option (a):

The nominal GDP measures the economic output in a particular time period, so it is a flow variable (a variable that measures with the reference of time period), not a stock variable (a variable that measurable at a point of time). Thus, option (a) is incorrect.

Option (c):

The value of the economy’s output measured at current price in a particular time period is called nominal GDP. Thus, option (c) is incorrect.

Option (d):

Nominal GDP measures the economic output at current price in a particular time period. Usually, it is for one year not based on a particular point of time. Thus, option (d) is incorrect.

Economics Concept Introduction

Nominal GDP (Gross Domestic Product): Nominal GDP measures the value of economy’s total output in a particular time period.

Flow variable: A flow variable is a variable that can be measured with reference to a period of time.