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An economy whose nominal GDP rises while prices rise faster has real GDP that is:
ARising
BUnchanged
CUndefined
DFalling
Answer & Solution
Correct answer: D. Falling
1. Nominal and real GDP differ by the price adjustment.
2. Real GDP is inflation-adjusted gross domestic product.
3. Nominal GDP has not been adjusted for price changes.
4. If prices rise faster than nominal output, the adjustment more than cancels the rise.
5. Real GDP is therefore falling.
_Source: OpenStax Principles of Macroeconomics for AP Courses 2e (CC BY 4.0), Ch 5 'The Macroeconomic Perspective'_
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