Suppose that over a given time period nominal GDP rises by 6 percent and real GDP rises by 4 percent. Over this period, we know that:

Question

Quizplus · Accepted Answer

Nominal GDP includes both the quantity of goods and services produced and prices. If nominal GDP increases by 6 percent and real GDP (quantity of goods and services produced) increases by only 4 percent, then prices must have increased by 2 percent. Therefore, both the quantity of goods and services produced and prices increased, making choice C the correct answer.

Suppose That Over a Given Time Period Nominal GDP Rises