Which of the following statement is correct?
A)If nominal GDP increases,then real GDP must increase.
B)If nominal GDP decreases,then real GDP must increase.
C)If real GDP decreases,then nominal GDP must decrease.
D)Nominal and real GDP can change either in the same direction or the opposite direction.
E)If nominal GDP does not change,then real GDP cannot change.

Question

Quizplus · Accepted Answer

Nominal and real GDP can change either in the same direction or in the opposite direction. Nominal GDP refers to the monetary value of goods and services produced in an economy, while real GDP adjusts for inflation. Therefore, if prices increase, nominal GDP will increase but real GDP may stay the same or even decrease if the increase in prices leads to a decrease in production. Similarly, if prices decrease, nominal GDP will decrease but real GDP may stay the same or even increase if the decrease in prices leads to an increase in production.

Which of the Following Statement Is Correct