Suppose that an economy's output does not change from one year to the next, but the price level doubles. What happens to real GDP?
A) Real GDP doubles.
B) Real GDP is halved.
C) Real GDP doesn't change.
D) There is not enough information to determine what happens to real GDP.

Question

Quizplus · Accepted Answer

Real GDP is a measure of output adjusted for changes in price levels. In this scenario, the output remains unchanged, so the real GDP would also remain unchanged since there are no changes in the quantity of goods and services produced. Doubling the price level only means that each unit of output is worth twice as much as before, but the total quantity of output remains the same.

Suppose That an Economy's Output Does Not Change from One