Which of the following could cause nominal GDP to increase,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 with their prices. Therefore, an increase in prices (inflation) will cause nominal GDP to increase. However, if the quantity of final goods and services produced falls (i.e. real GDP decreases) despite the increase in prices, then there has been a decrease in economic output even though the nominal GDP is higher. This is usually indicative of a less productive economy with reduced consumer purchasing power.

Which of the Following Could Cause Nominal GDP to Increase,but