ECONOMICS
GDP
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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i and ii
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i and iii
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i only
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i, ii, and iii
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ii only
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Detailed explanation-1: -What Is the Effect of Inflation on Nominal GDP? Inflation will cause nominal GDP to rise, meaning that in looking at year-over-year changes, a rise in nominal GDP does not necessarily reflect economic growth but rather reflects the inflation rate within that period.
Detailed explanation-2: -Because it is measured in current prices, growing nominal GDP from year to year might reflect a rise in prices as opposed to growth in the number of goods and services produced. If all prices rise more or less together, known as inflation, then this will make nominal GDP appear greater.
Detailed explanation-3: -Real GDP adjusts for price changes due to inflation/deflation. The main difference between nominal GDP and real GDP is the adjustment for inflation.
Detailed explanation-4: -An increase in nominal GDP means an increase also in economic activity. Since nominal GDP accounts for all final goods and services in an economy at current market prices, growth in this economic measure can be attributed to either an increase in quantity or price.