In Figure 5.1,during the 1980-1990 time periods,real GDP was relatively constant but nominal GDP increased.This can be explained by

Question

Quizplus · Accepted Answer

Nominal GDP reflects the current prices and values of goods and services produced in the economy. Inflation increases the prices of goods and services, leading to an increase in nominal GDP even if real GDP, which reflects changes in production, remains constant. Therefore, the increase in nominal GDP during the 1980-1990 time period can be explained by inflation.