If GDP falls:
A)income and production must both fall.
B)income and production must both rise.
C)income must rise, but production may rise or fall.
D)none of the above.

Question

Quizplus · Accepted Answer

GDP measures the total value of goods and services produced in a country. If GDP falls, it means that the production of goods and services has decreased. Since production is a factor of income (more production leads to more income), it follows that income must also fall when GDP falls. Therefore, choice A is the correct answer. Choice B is incorrect because a fall in GDP means that production has decreased, so it is not possible for both production and income to rise. Choice C is incorrect because a fall in GDP means that production has decreased, so it is not possible for income to rise while production falls.

If GDP Falls