If a country experiences a rise in prices but produces the same quantity of output as in the previous year, its nominal GDP will _____ and its real GDP will _____.
A) increase; also increase
B) decrease; increase
C) increase; be unchanged
D) decrease; be unchanged

Question

Quizplus · Accepted Answer

Nominal GDP increases because it is calculated using current prices, which have risen. Real GDP remains unchanged because it is adjusted for inflation and reflects the same quantity of output.

If a Country Experiences a Rise in Prices but Produces