When nominal GDP falls for a given period, we know with certainty that:
A) either real output or the price level has decreased.
B) the price level has decreased.
C) real output has increased and the price level has decreased.
D) real output and the price level have both decreased.
E) real output has decreased.

Question

Quizplus · Accepted Answer

Nominal GDP is calculated by multiplying real output by the price level, so a decrease in nominal GDP could be due to a decrease in either real output or the price level. Without more information, we cannot determine which has decreased.

When Nominal GDP Falls for a Given Period, We Know