Each of the following statements includes two terms. In which of the following cases do the two terms NOT mean the same as each other?
Changes in real GDP and the GDP deflator
The question asks which pair of terms does NOT mean the same.
Nominal GDP and GDP at current prices are identical concepts — both measure the value of output using the prices prevailing in the current year. Similarly, Real GDP and GDP at constant prices mean the same thing — both measure output valued at the prices of a chosen base year, removing the effect of inflation. The base period and the reference period are also commonly used interchangeably in index-number and national-income statistics to denote the standard year against which comparisons are made.
However, a change in real GDP and a change in the GDP deflator measure entirely different things. A change in real GDP captures the growth in actual physical output (real economic activity), whereas a change in the GDP deflator measures the change in the general price level of all domestically produced goods and services. One reflects quantity, the other reflects price.
Hence, the pair that does NOT mean the same is "Changes in real GDP and the GDP deflator".
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