If nominal GDP increases from $10 trillion to $12 trillion in a year,it can only mean that aggregate output grew by 20%.

Question

Quizplus · Accepted Answer

Nominal GDP measures the value of goods and services produced in a country at current market prices. Therefore, an increase in nominal GDP from $10 trillion to $12 trillion does not necessarily mean that aggregate output grew by 20%. It could be due to an increase in prices, or a combination of both increases in output and prices. To determine the actual growth rate of aggregate output, it is necessary to adjust for inflation and calculate the real GDP growth rate.

If Nominal GDP Increases from $10 Trillion to $12 Trillion