ECONOMICS
GDP
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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We must be producing more goods and services.
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We must be experiencing inflation.
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Either there has been inflation or we are producing more.
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The value of the currency has fallen.
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Detailed explanation-1: -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-2: -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-3: -An increase in nominal GDP may just mean prices have increased, while an increase in real GDP definitely means output increased.
Detailed explanation-4: -Nominal GDP differs from real GDP in that it does not account for the effects of inflation or deflation. As a result, nominal GDP could inaccurately report true growth when compared year to year. The U.S. Bureau of Economic Analysis reports both real and nominal GDP.