If prices are rising on average,then
A)real GDP will always be equal to nominal GDP.
B)real GDP will be greater than nominal GDP in the years after the base year.
C)real GDP will be less than nominal GDP in the years before the base year.
D)real GDP will be greater than nominal GDP in the years before the base year.

Question

Quizplus · Accepted Answer

Real GDP is adjusted for inflation, whereas nominal GDP is not. If prices are rising (inflation), then nominal GDP will overstate the value of goods and services compared to real GDP. Therefore, in the years before the base year (when the prices were lower), the real GDP will be greater than the nominal GDP because the nominal GDP is not adjusted for the price increases that have occurred since the base year.

If Prices Are Rising on Average,then