Question

If nominal GDP rises, Multiple Choice real GDP must also rise. real GDP may either rise or fall. we can be certain that the price level has risen. real GDP must fall.

Answer 1

Answer:

Real GDP may either rise or fall.

Explanation:

Real GDP = (Nominal GDP ÷ Deflator) × 100

Real gross domestic product is defined as the measure of the economic output in a particular nation which takes into account the effect of both inflation and deflation in an economy.

If there is an increase in the nominal GDP from 100 to 110 and increase in inflation from 0 to 2% then as a result the real GDP will rise because percentage increase in nominal GDP is greater than percentage increase in inflation.

If there is an increase in the nominal GDP from 100 to 110 and increase in inflation from 0 to 15% then as a result the real GDP will fall because percentage increase in nominal GDP is lower than percentage increase in inflation.