If real GDP decreased by 1% and nominal GDP increased by 2%, then output:
A)increased and the price level increased.
B)increased and the price level decreased.
C)decreased and the price level increased.
D)decreased and the price level decreased.

Question

If real GDP decreased by 1% and nominal GDP increased by 2%, then output:
A)​increased and the price level increased.
B)​increased and the price level decreased.
C)​decreased and the price level increased.
D)​decreased and the price level decreased.

Quizplus · Accepted Answer

Real GDP measures the value of economic output adjusted for price changes, while nominal GDP measures economic output without adjusting for price changes. A decrease in real GDP alongside an increase in nominal GDP indicates that the output (quantity of goods and services produced) decreased, but the overall price level (average prices) increased.

If Real GDP Decreased by 1% and Nominal GDP Increased