Suppose nominal GDP increased in a given year.Based on this information,we know with certainty that
A)real output has increased.
B)the price level (GDP deflator)has increased.
C)real output and the price level (GDP deflator)have both increased.
D)either real output or the price level (GDP deflator)have increased.
E) real output has increased and the price level has decreased.

Question

Quizplus · Accepted Answer

An increase in nominal GDP can result from either an increase in real output or an increase in the price level (GDP deflator). Therefore, we can only conclude that either real output or the price level has increased, but we cannot determine which one without further information.

Suppose Nominal GDP Increased in a Given Year