If real GDP falls while nominal GDP rises, then prices on average have:
A) risen.
B) fallen.
C) stayed the same.
D) Real GDP cannot rise when nominal GDP falls.

Question

Quizplus · Accepted Answer

If nominal GDP rises while real GDP falls, it means that prices of goods and services must have increased. This is because nominal GDP is calculated using current market prices, while real GDP adjusts for changes in price over time. Therefore, if nominal GDP is higher than real GDP, it implies that prices have gone up.

If Real GDP Falls While Nominal GDP Rises, Then Prices