The change in real GDP is often inversely related to inflation.

Question

Quizplus · Accepted Answer

When inflation is high, the purchasing power of consumers decreases, resulting in decreased spending and lower demand for goods and services. This can lead to a decrease in the production of goods and services, resulting in a decrease in real GDP. Conversely, when inflation is low, consumers have more purchasing power, resulting in increased spending and higher demand for goods and services. This can lead to an increase in the production of goods and services, resulting in an increase in real GDP.

The Change in Real GDP Is Often Inversely Related to Inflation