Growth in nominal GDP over time can be caused by:
A) an increase in prices over time.
B) an increase in production over time.
C) an increase in both prices and production over time.
D) neither an increase in prices nor an increase in production over time.

Question

Quizplus · Accepted Answer

Nominal GDP is calculated by multiplying the quantity of goods and services produced by their prices. Therefore, an increase in prices or an increase in production will lead to an increase in nominal GDP. If both prices and production increase over time, then the nominal GDP will show even larger growth. Option A (an increase in prices only) would result in nominal GDP growth, but would not necessarily reflect growth in the real economy. Option B (an increase in production only) would result in real economic growth, but not necessarily in nominal GDP growth if prices remained constant. Option D (neither an increase in prices nor production) would result in no nominal or real growth.

Growth in Nominal GDP Over Time Can Be Caused By