When the value of nominal GDP increases from one year to the next, we know that one or two things must have happened during that time:
A)The nation produced fewer goods and services and/or prices fell for goods and services.
B)Consumption expenditure increased and/or corporate profits increased.
C)Investment increased and/or payments to employees increased.
D)The nation produced more goods and services and/or prices rose for goods and services.
E)The value of real GDP must have increased and/or the price level must have decreased.

Question

Quizplus · Accepted Answer

Nominal GDP is calculated by using current prices to value the output of goods and services, so an increase in nominal GDP can be due to an increase in the actual production of goods and services, an increase in their prices, or both. Therefore, the correct choice is D - the nation produced more goods and services and/or prices rose for goods and services.

When the Value of Nominal GDP Increases from One Year