If real GDP in 2012 using 2011 prices is higher than nominal GDP of 2012,then
A)prices in 2012 are lower than prices in the base year.
B)nominal GDP in 2012 equals nominal GDP in 2011.
C)prices in 2012 are higher than prices in the base year.
D)real GDP in 2012 is larger than real GDP in 2011.

Question

Quizplus · Accepted Answer

If real GDP in 2012 using 2011 prices is higher than nominal GDP of 2012, it means that the calculated real GDP has removed the effect of inflation that occurred between 2011 and 2012. Therefore, if real GDP is higher than nominal GDP, it suggests that the price level in 2012 is lower than the base year (2011). This implies that more goods and services were produced in 2012 than in 2011, and their prices were lower.

If Real GDP in 2012 Using 2011 Prices Is Higher