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a decrease in real GDP is always associated with a decrease in the price level. true/fale....

a decrease in real GDP is always associated with a decrease in the price level. true/fale. please explain
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Answer #1

A decrease in real GDP is always associated with a decrease in the price level - FALSE

Real GDP and Price level are negatively related meaning that rise in price leads to fall in real GDP as rise in price decreases the purchasing power of the economy leading to less output production and fall in prices results into increasing the purchasing power of the economy leading to rise in output. In this way price and real GDP are negatively related.

Real GDP = Nominal GDP/Deflator

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