Suppose that an economy's output does not change from one year to the next, but the price level doubles. What happens to nominal GDP?
A) Nominal GDP doubles.
B) Nominal GDP is halved.
C) Nominal GDP doesn't change.
D) There is not enough information to determine what happens to nominal GDP.

Question

Quizplus · Accepted Answer

Nominal GDP is calculated by multiplying the quantity of goods and services produced by their respective prices. Since the price level has doubled, the prices of all goods and services have doubled. Therefore, when multiplied by the quantity of goods and services produced, nominal GDP also doubles.

Suppose That an Economy's Output Does Not Change from One