ECONOMICS
BUSINESS CYCLES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The real GDP and/or the price level has increased
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The inflation rate was negative
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The real GDP increased
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The price level increased
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Both the price level and real GDP increased
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Detailed explanation-1: -A positive difference in nominal minus real GDP signifies inflation and a negative difference signifies deflation. In other words, inflation occurs when nominal GDP is higher than real GDP. Deflation happens when real GDP is higher than nominal GDP.
Detailed explanation-2: -An increase in GDP does not necessarily mean a nation has produced more output; it must be specified whether the GDP in question is nominal or real. An increase in nominal GDP may just mean prices have increased, while an increase in real GDP definitely means output increased.
Detailed explanation-3: -The real GDP only increases if the quantity of goods and services produced by the economy rises. Indeed the main reason for using the real GDP is that it removes any effect that inflation may have on the GDP of a country.
Detailed explanation-4: -Four major factors cause the real GDP of an economy to rise-An increase in consumer spending on consumption, an increase in investment spending, an increase in government spending, and an increase in net exports.