The change in nominal GDP will always exceed the change in real GDP when nominal GDP is
A) increasing and prices are unchanged.
B) increasing and prices are decreasing.
C) decreasing and prices are decreasing.
D) increasing and prices are increasing.

Question

Quizplus · Accepted Answer

The change in nominal GDP will always exceed the change in real GDP when nominal GDP is increasing and prices are increasing because nominal GDP includes the effects of both price changes and changes in production, while real GDP measures only changes in production. Therefore, when prices are increasing, the increase in nominal GDP will reflect both the increase in production and the increase in prices, resulting in a larger change than in real GDP.

The Change in Nominal GDP Will Always Exceed the Change