If both nominal GDP and real GDP increase from one year to the next, but the increase in real GDP is smaller than that of nominal GDP, we can conclude that:
A) prices went up, but output stayed the same.
B) prices stayed the same, but output went up.
C) both prices and output went up.
D) both prices and output stayed the same.

Question

Quizplus · Accepted Answer

When both nominal GDP and real GDP increase, but the increase in real GDP is smaller than that of nominal GDP, it indicates that both the output (real GDP) and the price level (reflected in the nominal GDP) have increased. Nominal GDP increases more than real GDP due to the inflation effect on nominal values.

If Both Nominal GDP and Real GDP Increase from One