Economics Real Vs Nominal Gdp Questions
Consumption affects real GDP by being one of the components of the GDP equation. Real GDP is calculated by subtracting the effects of inflation from nominal GDP, and consumption is a major component of the overall economic activity. When consumption increases, it indicates that individuals and households are spending more on goods and services, which leads to an increase in economic output. This increase in consumption contributes to the growth of real GDP as it reflects the overall level of economic activity in an economy.