AP Macroeconomics Question 418: Answer and Explanation

Test Information

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Question: 418

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

Explanation:

D-Nominal GDP rises with the price level. If output increases at a slower rate than increases in the price level, real GDP falls.