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22 January, 04:58

GDP in 1981 was $2.96 trillion. It grew to $3.07 trillion in 1982, yet the quantity of output actually decreased. How is this possible?

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  1. 22 January, 07:09
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    Inflation was higher in 1982

    Explanation:

    GDP is a measure of the sum value of goods and services produced in a country in a period. In calculating GDP, economists add up the total number of products and services produced and multiply them with their prices. The result is nominal GDP. The figures indicated for 1981 and 1982 are nominal GDP values.

    The actual value of output is measured by real GDP. Real GDP is nominal GDP that is adjusted for inflation. In 1982, the nominal GDP was higher, but the output was lower. The rise in GDP value in 1982 is a result of high prices used in the calculation. Inflation is the reason why GDP was reported as a higher figure in 1982 than in 1981, even though output was lower in 1982.
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