Which of the following statements about nominal GDP is true?
A. It accounts for price changes.
B. It accounts for inflation.
C. It grows when prices rise and output is constant.
D. It is measured at base year prices.
Answer (2)
The correct statement about nominal GDP is that it grows when prices rise while output remains constant (option C). Nominal GDP measures the total value of goods and services at current prices, without adjusting for inflation. Therefore, it can increase simply due to rising prices, even if actual production does not change.
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The correct statement about nominal GDP is that it grows when prices rise while output remains constant. This is because nominal GDP measures the total value of goods and services at current prices without adjusting for inflation. Understanding this distinction helps clarify the implications of nominal versus real GDP. ;
