If nominal GDP increased by 11 per cent while real GDP increased by only five per cent, then:
A)the price level must have increased by around six per cent
B)the price level must have increased by around 16 per cent
C)the price level remained steady but real output fell by around six per cent
D)the unemployment rate must have fallen during the year

Question

Quizplus · Accepted Answer

Nominal GDP includes both an increase in prices and an increase in real output. By subtracting the increase in real GDP from the increase in nominal GDP, we can determine that the increase in prices was around 6%. Therefore, choice A is the correct answer. Choice B overestimates the increase in prices, while choices C and D are not supported by the information given.

If Nominal GDP Increased by 11 Per Cent While Real