Historically, real GDP has increased less rapidly than nominal GDP because
A) price indices have not reﬂected improvements in product quality.
B) the general price level has increased.
C) technological progress has resulted in more eﬃcient production.
D) the general price level has decreased.

Question

Quizplus · Accepted Answer

Nominal GDP includes both changes in production and changes in the general price level, while real GDP only measures changes in production, with the effects of price changes removed. Therefore, if the general price level has increased (inflation), nominal GDP will increase more than real GDP.

Historically, Real GDP Has Increased Less Rapidly Than Nominal GDP