Question

In years with inflation, real GDP increases ________ nominal GDP.

A. slower than

B. at the same rate as

C. faster than

D. sometimes faster, sometimes slower, and sometimes at the same rate as

Answer 1

Answer- Correct option is 'A'

In years with inflation, real GDP increases slower than nominal GDP. Firstly we should clear about the real GDP, so real GDP measures the value of all goods and services produced by an economy in a given year. Because real GDP measured in 'constant price' but nominal GDP measured in 'current price', if all prices rise more or less together, known as inflation, then this will make nominal GDP appear greater. So, in years with inflation, nominal GDP is greater than the real GDP. It means real GDP increases slower than the nominal GDP.