Which statement is TRUE?
A) Nominal GDP is always larger than real GDP.
B) Nominal GDP can only rise from one year to the next because of price increases.
C) Nominal GDP can only rise from one year to the next because of production increases.
D) Nominal GDP can rise from one year to the next because of price increases or because of production increases, or both.

Question

Quizplus · Accepted Answer

Nominal GDP can rise from one year to the next because of price increases or because of production increases, or both. Nominal GDP measures the value of goods and services produced in an economy at current market prices without adjusting for inflation. If prices of goods and services increase from one year to the next, nominal GDP will increase even if there is no increase in the quantities produced. Similarly, if there is an increase in production but prices remain constant, nominal GDP will also increase. Real GDP, on the other hand, adjusts for inflation and provides a more accurate measure of economic growth over time.

Which Statement Is TRUE