Which of the following statements is correct?
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 rise from one year to the next because of price increases or because the country actually produces more, or both.
D) All of the answers are correct.

Question

Quizplus · Accepted Answer

Nominal GDP can rise from one year to the next due to price increases, but it can also increase if the country actually produces more goods and services. Real GDP adjusts for inflation and reflects changes in production levels, whereas nominal GDP does not. Therefore, C is the correct statement. A is incorrect because nominal GDP can be smaller than real GDP if prices decrease. B is incorrect because nominal GDP can also rise if production levels increase, even if prices stay the same. D is incorrect because A and B are not correct statements.

Which of the Following Statements Is Correct