A shortcoming of nominal GDP is that:
A) an increase in nominal GDP can be caused by changes in either price or quantity.
B) it does not measure changes in employment.
C) it does not measure changes in price.
D) it does not include net exports.
E) it does not include the value obtained through purchases of stocks and bonds.

Question

Quizplus · Accepted Answer

Nominal GDP only measures the monetary value of output without adjusting for changes in price levels. Therefore, an increase in nominal GDP can be caused by either an increase in production or an increase in the price level. This makes it difficult to determine whether an increase in nominal GDP represents an actual increase in the economy's output or simply reflects inflation.

A Shortcoming of Nominal GDP Is That