In an economy with persistent inflation,
A) real GDP will grow faster than nominal GDP.
B) nominal GDP will grow faster than real GDP.
C) nominal and real GDP will grow at the same rate.
D) nominal and real GDP will both fall.

Question

Quizplus · Accepted Answer

In an economy with persistent inflation, prices are generally increasing over time. Therefore, nominal GDP (which includes the effect of price increases) will grow faster than real GDP (which measures output adjusted for inflation).

In an Economy with Persistent Inflation