From an initial situation where P = 1.00 and Y = 100,6 percent nominal GDP growth that causes P to go to 1.02 also causes Y to go to
A)98.
B)112.
C)103.
D)104.

Question

Quizplus · Accepted Answer

Nominal GDP growth of 6% implies that the product of P (price level) and Y (real GDP) increases by 6%. If P increases from 1.00 to 1.02, then Y must increase to 104 to achieve a 6% increase in nominal GDP (1.02 * 104 = 106.08, which is approximately 6% more than 100).

From an Initial Situation Where P = 1