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If nominal GDP rises we can say that A. production has risen or prices have risen or both have risen. B. prices have risen and production remains constant. C. production has risen and prices remain constant. D. production has fallen and prices have risen.

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Answer:

All the options are possible:

  • A. production has risen or prices have risen or both have risen.
  • B. prices have risen and production remains constant.
  • C. production has risen and prices remain constant.
  • D. production has fallen and prices have risen.

Explanation:

Nominal gross domestic product (GDP) represents the market value of all the new and legal goods and services produced within a country during a given period of time (generally a year). Since it is not adjusted to inflation (real GDP is), an increase in nominal GDP may result from higher inflation or higher production, or a combination of both. Only if adjusted to inflation (real GDP) we can know if the increase resulted from higher production.

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