Which of the following could cause nominal GDP to increase next year,but real GDP to decrease?
A)The price level rises and the quantity of final goods and services produced rises.
B)The price level rises and the quantity of final goods and services produced falls.
C)The price level falls and the quantity of final goods and services produced rises.
D)The price level falls and the quantity of final goods and services produced falls.

Question

Quizplus · Accepted Answer

Nominal GDP is calculated by multiplying the quantity of final goods and services produced by their current market price. Therefore, if the price level rises, nominal GDP will increase. However, if the quantity of final goods and services produced falls, real GDP will decrease. This is because real GDP measures the quantity of final goods and services produced using a constant set of prices (base year prices), which removes the impact of changes in the price level from the calculation.

Which of the Following Could Cause Nominal GDP to Increase