AP Macroeconomics Question 418: Answer and Explanation
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5. Suppose the price level in the United States has risen in the past year, but production of goods and services has remained constant. Based on this information, which of the following is true?
NOMINAL GDP REAL GDP
- A. Increased Increased
- B. No change Decreased
- C. Decreased Decreased
- D. Increased Decreased
- E. Decreased Increased
Correct Answer: D
D-Nominal GDP rises with the price level. If output increases at a slower rate than increases in the price level, real GDP falls.