If real GDP increases and the price index also increases:
A)nominal GDP must also have risen.
B)nominal GDP must have fallen.
C)nominal GDP could have either risen or fallen.
D)the percentage increase in nominal GDP must have been greater than the percentage increase in the price level.

Question

If real GDP increases and the price index also increases:
A)​nominal GDP must also have risen.
B)​nominal GDP must have fallen.
C)​nominal GDP could have either risen or fallen.
D)​the percentage increase in nominal GDP must have been greater than the percentage increase in the price level.

Quizplus · Accepted Answer

Nominal GDP is calculated by multiplying the quantities of goods and services produced by their current prices. If both real GDP (which measures the volume of production adjusted for price changes) and the price index (a measure of price levels) increase, it means that both the quantity of goods and services produced and their prices have increased. Therefore, nominal GDP, which depends on both quantity and price, must also have increased.

If Real GDP Increases and the Price Index Also Increases