When nominal GDP is greater than real GDP it means
A) prices have risen since the year we use as a standard for constant prices.
B) the population has increased.
C) prices have fallen since the year we use as a standard for constant prices.
D) the population has decreased.
E) there is a mistake because nominal GDP can never be greater than real GDP.

Question

Quizplus · Accepted Answer

Nominal GDP is calculated using current market prices and does not adjust for inflation. Real GDP, on the other hand, is adjusted for inflation by using a base year's prices. Therefore, if nominal GDP is greater than real GDP, it means that prices have risen since the year we use as a standard for constant prices.

When Nominal GDP Is Greater Than Real GDP It Means