Real GDP growth is used to evaluate economic growth over time because:

• A. Real GDP growth is used to remove effects of price level changes.
• B. Real GDP growth includes inflation.
• C. Real GDP growth excludes government spending.
• D. Real GDP growth is computed using current year prices alone.

Answer: (A)

The main idea is to separate changes in output from changes in prices. Real GDP growth uses prices from a base year (or chain-weighted prices), so the value reflects how much more goods and services are produced, not just higher prices. If you only look at nominal GDP, inflation can push the number up even if production hasn’t increased, making growth look bigger than it really is. That’s why real GDP growth is preferred for measuring growth over time.

The other statements don’t fit because: inflation is not included in real GDP growth—it’s removed to focus on quantity changes; government spending is a component of GDP, so real GDP growth includes it rather than excluding it; and real GDP is not computed with current year prices alone—that would be nominal GDP, which mixes price level with output.