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Chapter 21: Problem 7

Briefly explain whether you agree with this statement: "Real GDP in 2016 was \(\$ 16.7\) trillion. This value is a large number. Therefore, economic growth must have been high during \(2016 . "\)

Short Answer

Expert verified
The statement is not necessarily correct. Economic growth pertains to the rate of increase in Real GDP over time, not the absolute value of the Real GDP. Therefore, without knowing the Real GDP of previous years, one cannot assert that economic growth must have been high during 2016 only because the Real GDP was high.

Step by step solution

01

Understand Real GDP

Real GDP is the measure of the economic output of a country, adjusted for inflation. It represents the value of all goods and services produced over a specific time period within a country.
02

Understand Economic Growth

Economic growth is essentially the increase in the amount of goods and services produced by an economy over time. It is not solely about the total value at a certain point but the change in that value from one period to another.
03

Apply the concepts to the statement

The given statement is focusing only on the total value of Real GDP in 2016, which was \(\$16.7\) trillion. It incorrectly concludes that this large figure indicates high economic growth. But, without information about the Real GDP from previous year(s), it's impossible to determine the rate of economic growth in 2016. A high total GDP merely indicates that the economy is large, not necessarily that it has grown significantly in the period in question.

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Most popular questions from this chapter

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