If real GDP in 2016 using 2015 prices is lower than nominal GDP of 2016, then
A) prices in 2016 are lower than prices in 2015.
B) nominal GDP in 2016 equals nominal GDP in 2015.
C) prices in 2016 are higher than prices in 2015.
D) real GDP in 2016 is larger than real GDP in 2015.

Question

Quizplus · Accepted Answer

Real GDP is calculated using the prices of a base year, so if real GDP in 2016 (using 2015 prices) is lower than nominal GDP in 2016, it indicates that the prices in 2016 have increased compared to the base year (2015). Nominal GDP reflects the current year prices, so an increase in nominal GDP relative to real GDP suggests higher prices in the current year.

If Real GDP in 2016 Using 2015 Prices Is Lower