If the Price Level Is Increasing at 4% and Output

question 17

Multiple Choice

If the price level is increasing at 4% and output is increasing at 5%,then

• A)Real GDP is increasing faster than nominal GDP.
• B)Nominal GDP is increasing faster than real GDP.
• C)Nominal GDP is increasing at 20%.
• D)None of the choices are correct.

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Definitions:

Inferior Good

A type of good for which demand decreases as the income of consumers increases, opposite of normal goods.

Income Increases

Situations where individuals or households experience a rise in earnings, affecting their purchasing power and consumption choices.

Demand Curve

A graphical representation that shows the relationship between the quantity of a good or service consumers are willing and able to purchase and its price.

Excess Demand

A market condition where the quantity demanded of a good exceeds the quantity supplied at a given price, often leading to price increases.