When there is rapid inflation,
A) growth in nominal GDP exceeds growth in real GDP.
B) growth in real GDP exceeds growth in nominal GDP.
C) growth in real GDP and nominal GDP are roughly equal.
D) there can never be any growth in nominal GDP.
E) government tries to increase growth in real GDP.

Question

Quizplus · Accepted Answer

Rapid inflation occurs when there is an increase in the overall price level in an economy. This increase in the price level causes nominal GDP (which is measured in current prices) to increase. However, if the rate of inflation is high, it can lead to a decrease in real GDP (which is adjusted for inflation). Therefore, growth in nominal GDP exceeds growth in real GDP during rapid inflation.

When There Is Rapid Inflation