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

Question

Quizplus · Accepted Answer

Real GDP is calculated using constant or base year prices, whereas nominal GDP is calculated using current year prices. If the real GDP in 2016 using 2015 prices is higher than the nominal GDP of 2016, it means that the output has increased while the prices have remained constant or lower than the base year (2015). Thus, prices in 2016 are lower (or equal) than prices in the base year (2015). Therefore, the best choice is A.

If Real GDP in 2016 Using 2015 Prices Is Higher