Suppose nominal GDP in 2011 increased by 5% (over its previous level in 2010). Given this information we know with certainty that Group of answer choices real GDP increased during 2010 the price level increased during 2010 both the price level and the real GDP increased during 2010 either the price level or real GDP increased during 2010 more information is needed to answer this question.
Question
Suppose nominal GDP in 2011 increased by 5% (over its previous level in 2010). Given this information we know with certainty that Group of answer choices
real GDP increased during 2010
the price level increased during 2010
both the price level and the real GDP increased during 2010
either the price level or real GDP increased during 2010
more information is needed to answer this question.
Solution
The correct answer is "either the price level or real GDP increased during 2010."
Here's why:
Nominal GDP is the market value of all final goods and services produced in a country in a given period. It is calculated using the current market prices. Therefore, an increase in nominal GDP could be due to an increase in the production of goods and services (which would increase real GDP), or due to an increase in the prices of these goods and services (which would increase the price level), or both.
So, without more specific information, we can only say for certain that either the price level or real GDP (or both) increased during 2010.
Similar Questions
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