If nominal GDP increases by 3 percent from 2004 to 2005 and real GDP increases by 5 percent from 2004 to 2005,this indicates that
A)depreciation occurred
B)taxes increased
C)the inflation rate decreased
D)the price level decreased
E)output decreased

Question

Quizplus · Accepted Answer

If real GDP increases by 5% and nominal GDP increases by only 3%, it indicates that the price level (inflation) must have decreased, as real GDP is adjusted for inflation.

If Nominal GDP Increases by 3 Percent from 2004 to 2005