Suppose that nominal GDP fell from $5,000 billion in 1997 to $4,800 billion in 1998. Suppose that over this same period real GDP did not change. In this instance:

Question

Quizplus · Accepted Answer

Nominal GDP is the product of the quantity of goods and services produced and their prices. If real GDP did not change, then quantity was constant. Therefore, the only explanation for nominal GDP to fall is that prices decreased, which is option B.

Suppose That Nominal GDP Fell from $5,000 Billion in 1997