When there is positive inflation,
A) growth in nominal GDP exceeds growth in real GDP.
B) growth in real GDP exceeds growth in nominal GDP.
C) growth in real GDP and nominal GDP are roughly equal.
D) there can never be any growth in nominal GDP.

Question

Quizplus · Accepted Answer

Positive inflation means that there is an increase in the overall price level of goods and services in an economy. This increase in prices causes the nominal GDP (measured in current prices) to rise. However, since the increase in prices is not due to an increase in output, the real GDP (adjusted for inflation) does not rise by the same amount. Hence, growth in nominal GDP exceeds growth in real GDP in the presence of positive inflation.

When There Is Positive Inflation