Suppose a small economy produces only HDTV sets.In year one, 100,000 sets are produced and sold at a price of $1,200 each.In year two, 100,000 sets are produced and sold at a price of $1,000 each.As a result,
A)nominal GDP stays constant, while real GDP decreases.
B)nominal GDP decreases, while real GDP stays constant.
C)nominal GDP and real GDP both decrease.
D)nominal GDP decreases, and real GDP decreases even more.

Question

Quizplus · Accepted Answer

Nominal GDP decreases because the price per set has decreased from $1,200 to $1,000, while the quantity remains the same. Real GDP stays constant because the quantity of HDTV sets produced and sold remains the same, assuming year one is the base year.

Suppose a Small Economy Produces Only HDTV Sets