Nominal GDP increases if:
A) current prices increase, while current quantities decrease.
B) current quantities increase, while current prices decrease.
C) current prices or current quantities increase.
D) real GDP increases.
E) real GDP decreases.

Question

Quizplus · Accepted Answer

Nominal GDP is the product of current prices and current quantities of goods and services produced in an economy. Therefore, nominal GDP will increase if either current prices or current quantities increase. Option A is incorrect as a decrease in current quantities will result in a decrease in nominal GDP even if prices increase. Option B is incorrect as a decrease in prices will result in a decrease in nominal GDP even if quantities increase. Option D and E are also incorrect as they refer to changes in real GDP, which adjusts for inflation and measures only changes in quantity produced.

Nominal GDP Increases If