In an economy is experiencing inflation and output growth, nominal GDP will rise faster than real GDP.

Question

Quizplus · Accepted Answer

Inflation leads to an increase in nominal GDP, as the price of goods and services increases. Output growth also leads to an increase in GDP, but it only affects the real GDP as it measures the production of goods and services taking inflation into account. Therefore, when both inflation and output growth occur simultaneously, nominal GDP will increase faster than real GDP.

In an Economy Is Experiencing Inflation and Output Growth, Nominal