A nation's output rises by 3%, and its average price level rises by 2%. This means that the nation's nominal GDP rises by _____ and real GDP rises by:
A) 5%; 3%.
B) 6%; 4%.
C) 6%; 3%.
D) 5%; 2%.

Question

Quizplus · Accepted Answer

Nominal GDP rises by the sum of the percentage increase in real GDP and the percentage increase in the price level, which is 3% + 2% = 5%. Real GDP rises by the actual increase in output, which is 3%.

A Nation's Output Rises by 3%, and Its Average Price