(Nominal GDP) Which of the following is a necessary condition —something that must occur—for nominal GDP to rise? Explain your answers. Actual production must increase. The price level must increase. Real GDP must increase. Both the price level and actual production must increase. Either the price level or real GDP must increase
(Nominal GDP) Which of the following is a necessary condition —something that must occur—for nominal GDP to rise? Explain your answers. Actual production must increase. The price level must increase. Real GDP must increase. Both the price level and actual production must increase. Either the price level or real GDP must increase
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter7: Taking The Nation's Economic Pulse
Section: Chapter Questions
Problem 14CQ
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Question
- (Nominal
GDP ) Which of the following is a necessary condition —something that must occur—for nominal GDP to rise? Explain your answers.
- Actual production must increase.
- The
price level must increase.
- Real GDP must increase.
- Both the price level and actual production must increase.
- Either the price level or real GDP must increase
Expert Solution
Step 1.
Nominal GDP (NGDP) = Real GDP (RGDP) x Price level (P)
So,
% Change in NGDP = % Change in RGDP + % Change in P
So, NGDP will increase if
- RGDP increases, keeping P unchanged, or
- P increases, keeping RGDP unchanged, or
- Both RGDP & P increase.
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