Unformatted text preview: increases in GDP. From the GDP growth rate it is therefore difficult to determine if it is the amount of output that is changing or if it is the price of output undergoing change. This limitation means that an increase in GDP does not necessarily imply that an economy is growing. If, for example, Country B produced in one year 5 bananas each worth $1 and 5 backrubs each worth $6, then the GDP would be $35. If in the next year the price of bananas jumps to $2 and the quantities produced remain the same, then the GDP of Country B would be $40. While the market value of the goods and services produced by Country B increased, the amount of goods and services produced did not. This problem can make comparison of GDP from one year to the next difficult as changes in GDP are not necessarily due to economic growth....
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- Fall '08
- Microeconomics, $1, $2, $6, GDP Growth Rate, $35