Which of the following statements is correct?
A)If nominal GDP decreases,then real GDP must increase.
B)If nominal GDP increases,then real GDP must increase.
C)Nominal and real GDP can change either in the same direction or the opposite direction.
D)If nominal GDP does not change,then real GDP cannot change.
E)If real GDP decreases,then nominal GDP must decrease.

Question

Quizplus · Accepted Answer

Nominal GDP is calculated based on current market prices, while real GDP is adjusted for changes in inflation. Therefore, nominal and real GDP can change in the same direction (if inflation is low and prices are stable) or the opposite direction (if inflation is high and prices are rising faster than output). Option A, B, D, and E are incorrect because they suggest a fixed relationship between nominal and real GDP, which is not the case.

Which of the Following Statements Is Correct