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Question

A real value can be derived from a nominal value by _______.

A
Adjusting for change over time
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B
Adjusting for data collection errors
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C
Adjusting for population changes
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D
Adjusting for changes in prices
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Solution

The correct option is D Adjusting for changes in prices

The real value is nominal value adjusted for inflation. The real value is obtained by removing the effect of price level changes from the nominal value of time-series data, so as to obtain a truer picture of economic trends. The nominal value of time-series data such as gross domestic product and incomes is adjusted by a deflator to derive their real values.


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